By C.Custer for TechinAsia.com
Over the past half year, things have gotten pretty rough for China’s P2P lending industry, and I have chronicled those travails in some detail. But the latest blow for an industry that is already struggling with high-profile fraud cases, withering bank support, and a definite slowdown may be an unexpected one: it’s getting hard to find places to rent.
China’s National Business Daily is the latest of numerous reports in the Chinese press that high-end office buildings in Shanghai, China’s finance hub, will no longer rent to P2P lending firms.
Part of it, of course, is the fear that these companies will vanish, either because they’ve gone out of business (as many already have) or because they’ve been taken down on criminal charges like Ezubao’s Ponzi scheme case. And part of it is the knowledge that China’s government has plans to tighten oversight of the P2P sector – other business clients don’t necessarily want to work right next to a company that’s drawing tons of regulatory heat.
China’s high-end landlords don’t seem to be out of the zeitgeist here.
But the biggest reason, one building worker told NDB, is that when a P2P company dies, its customers – the hundreds or thousands of everyday citizens whose investments have vanished into the ether, come to the building complaining and looking for answers. It pulls down the value of the whole building, the paper’s source said.
This is not to say that it’s impossible for P2P firms to find space. The most prestigious office buildings and business parks are rejecting them on site, but elsewhere there’s office space to be had, so long as the P2P company is willing to cough up a massive security deposit.
China’s high-end landlords don’t seem to be out of the zeitgeist here; with a few high-profile exceptions, China’s net users don’t seem to have much trust in P2P lenders either. Articles about landlords being skeptical of P2P firms have been met mostly with approving comments and exclamations about how most P2P firms are scams or multi-level marketing schemes.
Can this be fixed?
At the risk of stating the obvious, this industry has a massive PR problem on its hands. For many P2P firms, this will be the end. But the industry if the industry as a whole is to save itself, a few things need to happen fast.
First, companies need to get transparent. Chinese P2P lending firm Yirendai went to the trouble of listing on the NYSE just so that they could show investors they were legit. By submitting their finances to the US SEC, a neutral third party, the company hopes to set itself apart from less trustworthy firms in the eyes of potential customers. Obviously, not every P2P firm has the access or resources to list in the US, but companies that want to survive need to embrace this attitude and start getting proactive about transparency immediately.
If people think your industry is full of scammers – and at this point, they do – then you need to start providing as much proof as you can that you’re not. And that proof needs to be transmitted via the most unassailable, trustworthy channels you can find.
Second, companies need to get proactive about government oversight. China’s regulators clearly want to keep a close eye on this industry, and at this point it seems that’s best for all involved – the companies, the government, and the individual investors who’ve bought into the P2P ideal. P2P lending firms should be proactively approaching the government with suggestions about how to most effectively and quickly regulate this industry. Governments move slowly (although China’s can be quicker than most), and if regulation that people can trust takes too long to set up, a lot of the industry’s current players probably won’t survive to see it.
First appeared at TechinAsia