July 17 (NBD) -- Chinese Peer-to-Peer (P2P) lending platform baocai.com on Sunday announced loan defaults due to declining repayment willingness and capability of the borrowers.

Six P2P platforms reported defaults from July 12-13, and one was suspected of absconding, according to a third-party P2P information platform.

In contrast to continual reports of defaults, many P2P platforms declared huge fund-raising. For instance, baocai.com said the company had obtained investment promise of approximately 200 million yuan (29.9 million U.S. dollars) from two listed companies a week earlier.

According to the website of baocai.com, the platform lent an accumulated sum of 8.656 billion yuan (1.3 billion U.S. dollars) as of July 15 this year, among which the principal receivable worth 2.233 billion yuan (334.2 million U.S. dollars). Altogether 3,148 lending projects remain uncollected. However, it is surprising to note on its website that default rate of the company is zero. 

Other than baocai.com, two P2P firms frbao.com and touzhijia.com also declared defaults shortly after announcing to have secured new injection.

Xue Hongyan, director of the Suning Financial Research Institute, said to NBD that the high default rate may derail financing plans of P2P companies. Equity financing is a long process during which problems may surface. Amid current default wave, claiming new capital injection has become an effective way to maintain investors' confidence for P2P platforms and chances are that platforms may spread false fund-raising information.

Xiao Sa, council member of the China Banking Law Society, explained to NBD that platforms which play false financing scheme will possibly run off with money or report defaults once they win heavy investment.

The business model of internet finance is valued comparatively high due to the traditional capitals it attracts, but the high value can become just a scrap of paper if defaults or bad loans arise, Xiao further explained.

P2PEye vice chairman Li Guangyao told NBD that good money drives out bad in the online lending industry and good money favors good investment targets. But Li also warned that some platforms may actually sell its assets to others under the cover of fund-raising. Investors should sharpen their vigilance, as most platforms taken over by others didn't go well, Li added.


Email: gaohan@nbd.com.cn

Editor: Gao Han