Date
26 September 2017
China's peer-to-peer lending industry has been plagued with many problems due to lack of regulations and oversight. Photo: Bloomberg
China's peer-to-peer lending industry has been plagued with many problems due to lack of regulations and oversight. Photo: Bloomberg

Baidu tries a clean-up act on P2P lending platforms

With peer-to-peer (P2P) lending expanding rapidly in China in recent years, the risks have also multiplied in the online credit platforms. There have been quite a few cases of defaults and also dozens of cases where the website operators ran away with clients’ money — the latest such incident happened two weeks ago.

Now, regulators have been found wanting in getting a grip on the situation. Against this backdrop, the mantle seems to have fallen on internet search giant Baidu to bring things under control.

As the main source of finding P2P lending platforms through the internet, Baidu said it has started to clear out problematic P2P lending platforms from the search platform.

The company will also temporary remove the P2P firms that are using Baidu as a promotional channel, meaning that both lenders and borrowers will not be able to seek out P2P lending platforms through the Baidu search engine. The timing of re-launch of this search function is not yet clear.

Sources told the National Business Daily that Baidu will cooperate with governments, insurance companies, payment & clearing associations and other related parties and draw up a blacklist on the P2P lending industry, in order to lower the chances of financial fraud.

Industry black sheep have forced Baidu to do something about the foul practices, as nearly half of the players are using Baidu as the main channel to promote themselves.

In the most recent case, Wangwangdai {旺旺貸}, a P2P lending platform based in Shenzhen, vanished overnight after being in operation for five months. 

At one time, there were several thousand active investors lending to peers through Wangwangdai. The money they lost ranged from a few thousand to a few million yuan, according to reports. It is said that some investors had invested through the platform mainly because the site was promoted on Baidu. Such reports prompted Baidu to step up efforts to clean up its search channel.

Besides the efforts to draw up a blacklist, the Baidu-led group has launched a program aimed at protecting users’ rights and interests. Wangwangdai’s victims will be the first to claim compensation from Baidu; a guaranteed fund in the first stage is said to amount to 4 million yuan (US$640,000).

There are now about 2,000 P2P lending platforms in China, according to the National Business Daily. Nearly all of those platforms provide earnings yield of over 10 percent, with some even as high as 18 percent, which is very attractive to ordinary investors.

However, lack of regulations and oversight led to several P2P firms disappearing with clients’ funds, leaving the investors in a lurch. As many as 119 P2P lending firms are said to have absconded in the past few years, with the money involved in those cases amounting to about 2.1 billion yuan in total.

– Contact the writer at [email protected]

RC

EJ Insight writer

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