China boosting alt-fi to drive economy, Global Regulatory Forum hears

WASHINGTON, D.C. – Recent initiatives by China’s new government will have positive effects on the nation’s economy, the Deputy Secretary in Chief of the CCUAIF told the 2015 Global Regulatory Forum in Washington, D.C. today.

Xin Zhou spoke about China’s Alt-fi boom in front of a gathering of industry insiders and regulators.

China’s alt-fi industry now features 3,251 peer-to-peer platforms and 700 crowdfunding firms, Mr. Xin said.

Give much of the credit for the boom to a new national policy designed to foster new-business creation, he added. Beijing recognizes the revenue tap from real estate has dried up, so they are looking for other areas to generate revenue.

regulatory2015logoMuch of the push comes from local governments offering free land, tax abatement and other incentives to companies, Mr. Xin said.

Several factors have conspired to make crowdfunding a viable option in China, Mr. Xin said.

In the last two years, middle monthly incomes have risen from 5,000 rmb to 8,000. This group, which needs to be the source of much of the money backing the platforms, has much more disposable income.

They also have mobile phones in spades. Of China’s 1.29 billion mobile phone users, half possess smartphones, Mr. Xin said.

They also have a voracious appetite for social media, with several sites boasting more than 100 million members. The largest, WeChat, has 570 million members.

Active mobile phone users with more disposable income who love to meet online. Fertile ground for the alt-fi industry.

China’s peer-to-peer sector is not without its problems, Mr. Xin acknowledged. More than 1,000 platforms have failed, with half of those failures coming in the last year.

Illegal leveraging in the stock market was the main reason, Mr. Xin explained. Absent regulation, high interest rates and no transparency also contributed to the rising number of failures, which eventually drew official scrutiny.

The boom is not over, Mr. Xin concluded. The number of Chinese peer-to-peer platforms is expected to top 4,000. The market is expected to top one trillion rm b by the end of 2015, two trillion in 2016 and 20 trillion by 2020.

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