Nov. 30 (NBD) -- Guosheng Financial Holding, a Chinese financial investment holding group providing comprehensive financial products and services, announced Wednesday that its wholly-owned subsidiary Wa Sung Investment Limited (Wa Sung) plans to raise its stake in Chinese online micro-credit provider Qudian Inc with renminbi equivalent to no more than 20 million U.S. dollars. 

Wa Sung's decision was made based on its optimistic attitude towards the development of Qudian, and the deal will be settled with the company's equity fund.

In fact, Wa Sung has previously sold 232,201 shares in Qudian at the offering price of 24 U.S. dollars per share for around 5.57 million U.S. dollars, and also plans to sell up to 696,603 shares in Qudian's IPO over-allotment, according to an announcement of Guosheng Financial Holding in October.

It is noteworthy that shares of Qudian closed at 13.76 U.S. dollars Tuesday (EST), about half of its issuing price. 

Some institutions are likely to buy on the dips, explained Fang Song, president of the Guangzhou Internet Finance Association.

The deal still faces some obstacles. 

According to Guosheng Financial Holding's statement, Wa Sung's actual controller Du Li is also a board director of Qudian. Therefore, the transaction is required to be compliant with in-house transaction rules and should be conducted during the trading period specified by the U.S. securities market. 

In addition, there involves an affiliated transaction subject to shareholder approval. NBD notices that Guosheng Financial's subordinate company Guosheng Securities Asset Management Co., Ltd. provides financial consulting services for Beijing Happy Times Technology Development Co., Ltd., parent company of Qudian. 

Fang, at the same time, pointed out that the cash loan sector, in which Qudian operates, sees plenty of room for growth, given the relatively low coverage of financial services in China as compared to other countries. 

This, however, doesn't mean the niche segment will continue its strong growth momentum. 

A recent regulatory notice released by China's Internet Financial Risk Special Rectification Work Leadership Team Office has put the brakes on the highly-sought small-loan sector. 

Saying that cash loan services offered by some institutions present huge risks, the notice urges regulators at all levels to suspend regulatory approval for new (online) microlenders, or for new trans-provincial (cities or autonomous regions) microlending business operation. 

This is regarded as a prelude to the country's regulation of the cash credit business, which is often associated with issues like whopping interest rates and awful means of demanding repayment. 

A statement by the National Internet Finance Association of China last Friday requires that institutions unqualified to offer small cash loan services via internet should suspend their businesses immediately, while those qualified should enhance self-discipline and fix prices reasonably to make sure that the interest rate is compliant with China's laws and regulations.  

Email: lansuying@nbd.com.cn