Pedestrians walk on a crossing near the Qianmen Gate in Beijing – China’s tightening of rules for consumer finance companies is likely to force consolidation in the roughly $120 billion sector that provides high-interest loans for millions of people shut out of traditional banking.
The National Financial Regulatory Administration (NFRA) announced revamped and stricter rules for the sector on Monday, measures that are expected to drive China’s consumer finance companies to seek deeper-pocketed investors or merge.
“The tougher rules will see a wave of existing consumer finance companies seeking new capital injections and expansions,” said one analyst at an industry association who asked not to be named because he was not authorized to speak to the media.
China’s largest consumer lender, Chongqing Ant Consumer Finance Co, owned by Alibaba affiliate Ant Group, has a registered capital of 23 billion yuan.
Analysts and finance executives expect a grace period after the revised rules take effect next month of several months or even a year as NFRA readies the rules for implementation, analysts said.
In a question and answer statement published late on Monday, NFRA said that details on the timeline for firms to meet the new standards would be published later, without giving a specific time frame.