BEIJING (Reuters) – A top-level Chinese government body issued an urgent notice on Tuesday to provincial governments urging them to suspend regulatory approval for the setting up of new internet micro loan companies, sources who had seen the notice told Reuters.
The body, tasked by the central government in Beijing to rein in risks in the growing online finance sector, also told local regulators to restrict granting of new approvals for micro loan companies to conduct lending across regions, according to the sources.
The information office of the State Council, or Cabinet, and the People’s Bank of China could not be immediately reached for comment.
Companies providing small loans, especially on the internet, have expanded rapidly in the past year. That growth has been partly due to loose government rules.
Such firms meet demand for credit from individuals who have been shunned by Chinese banks, which typically prefer big corporate clients. But interest rates on such small loans provided by non-banks are very high, which is not often appreciated by individuals drawn to easy terms and conditions.
Many such firms operate over the internet, granting loans to borrowers over apps on their smartphones. Consumer lending through Chinese online platforms more than tripled last year to almost $140 billion, according to a recent report by the Cambridge Centre for Alternative Finance.
Reporting by Shu Zhang and Ryan Woo; Editing by Alison Williams