SINGAPORE—Dianrong, one of China’s biggest peer-to-peer (P2P) lenders, is laying off staff and shutting stores. The company blamed the Chinese regime for its troubles and said the absence of clear-cut policies was proving to be a heavy burden.
“Some people wonder why Dianrong’s growth has slowed in the past two years. It was not because we did not want to or could not grow. It was because we were told not to grow,” Guo Yuhang, Dianrong’s co-founder, said in an internal memo seen by Reuters.
“While the industry has expanded quickly to a large and complex scale over the years, regulatory directions keep changing and different regions have different rules,” Guo said, in rare criticism of policy-making in China.
Dianrong shut down 60 of its 90 offline stores and laid off an estimated 2,000 employees, Reuters reported in early March.
The Shanghai-based company was co-founded by Soul Htite, who was also behind U.S. online lender LendingClub Corp., and is backed by Singapore sovereign fund GIC Pte Ltd. and Standard Chartered Private Equity.
Beijing’s multi-year crackdown on risky lending practices and excessive leverage have caused a wave of P2P collapses and triggered protests by angry investors who lost their savings.
“Grey rhino” risks, or highly obvious yet ignored threats, are on the rise, including risks from internet finance such as P2P lenders, a central bank official wrote in an official publication on March 18.
The industry could face a fresh wave of regulatory scrutiny after several fintech companies were denounced by state-run CCTV during the country’s annual consumer rights day TV show on Friday.
Dianrong, which expanded rapidly in 2017–2018 in a loose regulatory environment, had to cut back in the second half of 2018, Guo said in the memo.
He added that many highly promising businesses Dianrong developed as part of its aggressive expansion have turned into “heavy burdens with unbearable high costs” for the company as regulations unexpectedly tightened.
The company’s outstanding transaction volume has shrunk to 10 billion yuan ($1.49 billion) from its peak of 14 billion yuan, Guo said. Some employees were not paid for two months, he said.
China’s central bank has yet to respond to a faxed request seeking comment.
The central bank said earlier in March that it would gradually set up a system of rules to regulate fintech and cultivate conditions conducive to the development of the industry.
“We hope regulators can give the industry a clear, and definite timetable, and give guidance and a ray of hope for companies that stick to compliance,” Guo said in the memo.
“The situation of the industry shows that the one-size-fits-all rule will definitely curb innovative businesses.”
Guo did not comment further when contacted by Reuters.
Victims of P2P Lending Scams
Since April 2018, thousands of P2P online financial platforms in China have crashed, devastating the industry and leaving millions of investors in financial ruin.
Many of these common citizens, who invested because of promises of double-digit returns, saw their life savings wiped out. And in seeking to appeal their cases to the central government, which allowed the platforms to grow with scant oversight, they have been repeatedly silenced.
P2P lending company Yindou Net Peer to Peer went bankrupt on July 18 during China’s recent P2P crash. Its CEO fled the country. The company then announced that none of its 4.4 billion yuan (about $600 million) in debt would be repaid. Many of its estimated 20,000 investors lost their life savings.
Protests against Yindou broke out in Beijing, Shanghai, Zhengzhou, and other cities, but were quickly suppressed by local public security forces.
On Oct. 17, hundreds of victims gathered in Beijing to stage larger protests in hopes of attracting the attention and sympathy of the central authorities. Instead, 50 of them were arrested.
By Shu Zhang. The Epoch Times contributed to this report.