China to step up oversight of online cash loans
Zhao Xuejie
["china"]
As online cash loan service prospers in China, the Chinese government is ready to step up its oversight of this lightly regulated industry. Ji Zhihong, director of the financial markets department at the People’s Bank of China, said at the China Internet Finance Forum on Saturday that China will improve regulation for all financing businesses. 
Cash loans, also known as fast loans, which come without a mortgage or guarantee, are on the rise in China. Such services are provided by banks, small credit companies, online peer-to-peer lenders, as well as consumer finance companies. Reports say the entire cash loan market is between 600 billion yuan to 1 trillion yuan. 
However, as the industry formerly had no clear regulations, many online micro-credit firms have been taking advantage of regulatory loopholes, resulting in the financial loss of customers. Some firms have been accused of charging excessively high interest rates, avoiding clarification of rates and using violence to collect debts. 
The Chinese cash loan industry has no clear regulations, thus many online micro-credit firms have been taking advantage of regulatory loopholes, resulting in the financial loss of customers. /CGTN Screenshot

The Chinese cash loan industry has no clear regulations, thus many online micro-credit firms have been taking advantage of regulatory loopholes, resulting in the financial loss of customers. /CGTN Screenshot

The cash loan industry has recently jumped into the limelight after Qudian, a Beijing-based online lender, hit the New York Stock Exchange on October 18. Raising a staggering 900 million US dollars, Qudian witnessed its stock jumping nearly 40 percent in value on the opening day. It was the largest US-listed float by a Chinese company, and the fourth-largest US IPO this year. 
A day after its successful debut, however, the Alibaba-backed loan firm underwent a major crisis as local media began to question the legitimacy of its business. Qudian started by offering short-term micro loans through its mobile app to Chinese students. 
Like Qudian, many online cash loan services often target students, who do not have direct income but have the need for extra money. In recent years, there have been cases in which students had nude pictures exposed or committed suicide because they could not repay the debt. 
In November 2015, Qudian suspended its student-targeted loan service after the state issued a ban on the online service, following public outrage over the misdeeds of online cash loan companies. 
Controversy has also been generated as a result of the polarized rates that are being charged. The annualized interest rates charged by those lenders range from about 15 percent to more than 350 percent. Most domestic cash loan platforms often avoid clarifying rates to customers. Additional charges might include management fees, registration fees, service fees and a deposit. 
Professor John Gong from the University of International Business & Economics said business models are always preying on the poor and less sophisticated; people fall for the cash loan service because the demand for consumption grows as living standards improve. He said regulation is the key to keeping such an industry on track. 
China will strictly abide by laws and regulations to prevent financial risks brought by Internet financing activities and illegal fundraising. /CGTN Screenshot

China will strictly abide by laws and regulations to prevent financial risks brought by Internet financing activities and illegal fundraising. /CGTN Screenshot

“The government should take more regulatory oversight,” said Gong. “They should first rule out companies who are operating this business without licenses. Second, they should look at the loan rates offered.” 
The top leaders of China's financial system have also expressed their concerns over the online financing sector in China. At the annual meeting of the World Bank and the IMF, Zhou Xiaochuan, governor of the People's Bank of China, said Internet finance is one of the four aspects China will attach great importance to in the future.  
He said many online micro credit firms are providing financial services, while some of them are operating without a license, which might provoke unfair competition and financial risk. 
Recently, at the financial meeting of the 19th CPC National Congress, Guo Shuqing, chairman of the China Banking Regulatory Commission, told the press China will strictly abide by laws and regulations to prevent financial risks brought by Internet financing activities and illegal fundraising. 
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