Chinese Online Lenders Are Crashing After Credit Crackdown

Tyler Durden's picture

The ADRs of several Chinese lenders, such as recently IPO'd Qudian and Hexindai, are crashing following a report from Netease that the country has decided to halt approvals for new online microlenders, citing risky cash-loan businesses at some firms.

Bloomberg reports that the Netease report raised concern that the lenders, some of which just recently listed in the U.S., could be subject to further restrictions.

ADRs of Qudian (green) and China Rapid Finance (blue) fell as much as 20 percent, with Hexindai (red) and Yirendai also dropping...

Adding to the pain, state-backed business publication Yicai Global earlier said Qudian suffered a data leak related to millions of student users, citing a Nov. 20 article from local media outlet Yibencaijing.

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Once again the greedy, make-a-quick-buck, what-could-go-wrong, US equity market investor is left holding the bag... Will they ever learn?

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FreeShitter's picture

Our ecronomee is exproding

JRobby's picture

No, they will never learn.

"It's my job! I have to buy something! They keep printing it!

Two-bits's picture

Existing home sales may fall even further now. 

China is where the Seattle housing bubble is getting all of the money that inflates it. 

Iconoclast421's picture

Isnt it amzing how much crashing there is going on according to this site yet markets are at all time highs? Zero Hedge would have had a field day in the year 2000.

99hedges's picture

QUICK BUY THE CHINESE MICROLENDERS

aliens is here's picture

Hey Yellen I despise you. Drop dead.

resistedliving's picture

Did Mr. Bass make any money?

Bemused Observer's picture

Micro-lending...

I kinda like the idea of micro-lending. But it should not be a payments/compounding interest thing, it should be a flat fee based on the time you 'use' the money. So, if you borrow 500 dollars for say, six months, at the end you'd pay the 500 back, plus the fee for 6 months use of that 500 dollars, which should be reasonable. Don't pay, and you default, and are out of the program for life...no more micro-loans for you!

When I read that so many people can't come up with 500 dollars to cover an emergency, I see a great need for micro-loans that bypass the predatory lending systems we have now, where even a small loan can result in years of debt-slavery as it balloons to grotesque proportions with compounding interest. Most people who are short of funds don't need a big, complex loan that will never 'die'...they just need a few bucks to tide them over, and shouldn't be raked over the coals for repayment. And with smaller amounts and reasonable fees, most people would be able to pay it back, and would want to, to retain access to the service.

Keeping the loans small and manageable has another benefit, to the lenders. It means that a default isn't going to kill your operating budgets. With small loans, no one debtor can create lasting damage. That saying about how, if you owe a thousand dollars to the bank, YOU have a problem, but if you owe ten million, THEY have the problem, is absolutely true. That's why all the banks have problems now.

It's a shame that we here in the West tend to think of these loans as 'third world' stuff and don't take them seriously, many, many could be helped by a service like this. Instead, they go to the bank, and sign away their lives for a bigger loan than they need, at a cost higher than they can afford. Or to a payday lender, where they get thoroughly fucked, often for years after.

One wealthy person in a neighborhood could do this for all of his neighbors, and he'd make a profit, the neighbors could access needed funds at a reasonable cost, and defaults would not be a huge issue where the borrower and lender know each other and are neighbors. In places where they do these types of loans, they find that the borrowers are much more reliable with repayment than most of the 'big guys' are, because the locals KNOW how valuable a service this is, and don't want to lose it. It is a very successful program where it is implemented.

Ecclesia Militans's picture

I don't see financial services industries supporting something that can't be scaled up, and I don't see how to scale up a loan stream that cannot be projected into out periods based on volumes.  I see the equitable nature of your concept though, and it might be something to consider as a public service from a sovereign fund rather than a commercial enterprise.

Bemused Observer's picture

It is the scale that protects them, if they learn how to use it. You wouldn't use funding from professional financiers...they are the problem. You'd utilize private financing, and since the loan amounts are so small you could be up and running with a fairly small outlay. You'd not be doing stuff like business funding, or dealing with loans in the hundreds of thousands of dollars. This would be a service for the hard-working bastard who is barely making it, and gets hit with a 1200 dollar car repair bill. Or the unforeseen medical expense, an unexpected overdraft on the bank account, a major appliance 'death'.

 Yeah, you'd have to run it as more of a public service than a business, but you could turn a bit of a profit. Just not enough to interest or attract the larger predators, in this the smaller scale is helpful. But God help us all if we get to the point where nothing gets done unless it generates big profits for someone.

Bemused Observer's picture

I should add that it's not some 'bleeding heart' thing on my part...it's just that I KNOW what it feels like to be treading water and suddenly have life toss a cinderblock on your back...it is a sucker punch from Fate. It totally fucks your finances for months or longer, and sometimes you never fully recover. And it always seems to happen to the guy who least deserves it. That something so small as a car repair bill or a broken refrigerator could be the un-doing of a whole life and its plans seems like an evil to me. I was lucky to have family that could help, but too many don't. I wonder where I would have gone if I didn't have them...

rkoen's picture

If us investors feel like they're holding the bag, it's not in today's nearly 200 pt buying spree.

Temporalist's picture

On another topic in Chinal

Apple iPhone X is reportedly assembled with illegal high-school student labor

https://www.cnbc.com/2017/11/21/apple-iphone-x-reportedly-assembled-by-i...

roddy6667's picture

Online lending is just a way for the average guy to become a loan shark without leaving his keyboard. The world would be a better place if it all disappeared.