Tight domestic rules push P2P firms abroad
Chinese online peer-to-peer (P2P) lending companies have been rushing into Southeast Asian countries in recent months to cash in on untapped and lightly regulated markets that feature huge potential, as growth in the domestic market slows amid tightening regulations.
While much of Southeast Asia offers a promising future for these lenders given its huge population and underdeveloped financial services industry, most of the Chinese companies are betting on short-term gains rather than long-term growth, an industry expert noted on Wednesday.
Over 50 Chinese online lenders have launched overseas operations, with Southeast Asian countries such as Indonesia and Cambodia being the top destinations, the 21st Century Business Herald reported on Wednesday.
In Indonesia alone, there are more than 50 Chinese consumer lending apps at the moment, up from 30 just a month ago, the report said. The apps include well-known Chinese P2P platforms such as CreditEase, Lufax and jimu.com.
While some P2P lenders like Lufax and CreditEase entered the Southeast Asian market through opening subsidiaries in Singapore, others such as jimu.com entered via partnerships with local companies, according to the report.
The industry's overseas surge may have been prompted by tightening regulations in China and the collapse of some big P2P lenders such as Qbao, said Lu Zhenwang, founder of Shanghai Wanqing Commerce Consulting.
"I'm sure that China's regulations will become tougher and tougher [on the online P2P lending sector]… That's why these companies are scrambling to go out," Lu told the Global Times on Wednesday.
"They're heading for Southeast Asia because there's little supervision in the markets there. One of my friends moved his business to the region, saying that 'no one' is supervising the business at all," he said.
Lu noted that most companies shifting to Southeast Asia are speculative in nature. They want to take advantage of the loose regulatory environment and earn a quick buck like they did in the early days in China, rather than build long-term businesses.
Online P2P lending platforms have also been facing rising competition in China from big platforms like Alibaba Group's Alipay, according to Lu.
While some companies are indeed just looking for a unregulated market where it's easy to enter and operate, there are other factors in Southeast Asia that are attractive to Chinese P2P lending companies, said Zhou Zhihan, general manager of Chinese P2P lender Kaixin Financial.
"Most Southeast Asian countries have strong economic growth momentum, which stimulates the growth of local financial service demand and opens up a vast market for the development of the online lending industry," Zhou told the Global Times on Wednesday.
The close proximity between China and Southeast Asia in terms of distance, culture and economic development makes those places easier for Chinese companies to operate in, he said.
Zhou added that Kaixin Financial has no overseas expansion plans and will instead focus on the domestic market, particularly in lending to small and micro-sized businesses.
"The domestic market still has huge potential and there are still a lot of companies whose financing needs haven't been met," Zhou said.
