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Internet finance booms as China embraces new normal

By Leng Cheng | December 18, 2014, Thursday | Online Edition

Top business executives and market analysts attending the annual Sanya economic forum last week discussed the repercussions of slower growth in China and the new horizons opened by Internet financing.

Ha Jiming, Hong Kong-based managing director of the Goldman Sachs investment banking division, told the forum that gross domestic product may barely top 7 percent next year.

 “It’s very difficult to strike a balance between short-term growth and long-term reform needs,” Ha told a panel convened in Sanya, a city on Hainan Island. “China has to decide which scenario to choose: lower targets to reflect the need for economic rebalancing or a medium-high target to address the risk of escalating debt.”

China’s leaders have been trying to juggle the need to keep the economy humming along with the need to change the way it operates.

Last month, President Xi Jinping described what he called the “new normal,” stressing the increasing importance of consumer spending and industrial innovation over higher levels of investment.

In Sanya, Huang Mengfu, honorary chairman of the All-China Federation of Industry and Commerce, said that the services industry needs to comprise up to 70 percent of GDP in order to help industry transformation. According to the National Bureau of Statistics, services made up only 46.6 percent of the economy in the first half of 2014.

The theme of this year’s forum was “New Economy, New Balance.” Among the more interesting panels was a discussion about the emerging era of online financing and peer-to-peer lending.

“An era without banks is coming, and it won’t surprise me if one day commercial banks become extinct like dinosaurs,” Xu Nuojin, a vice director of research and statistics at the People’s bank of China, told the forum.

Tang Ning, founder and chief executive officer of CreditEase said his company would like to follow the lead of recently listed US counterpart LendingClub, but he gave no timetable for going public. He said CreditEase now has 2 million registered users and has helped facilitate loans totaling 2 billion yuan (US$323 billion).

Its online lending product Yirendai is able to distinguish a customer’s credit line within 10 minutes by using big data on the Internet, Tang said. Less than 1 percent of its loans have gone sour.

Cai Echeng, former vice president of the China Banking Regulatory Commission, told the forum that online financing has been accelerated by the technological development of big data.

However, he warned like Yang, “We need market reform to ensure that the industry is growing in a healthy manner.”

Li Feng, co-partner of IDG Capital Parters, a China-focused firm that invested in CreditEase, said his company is looking for innovation as financial markets are deregulated.

 “We focus on companies having the potential to get to the essence of the financial system,” Li said.

Peer-to-peer lending, the online system of individuals lending money without intermediaries such as banks, has been growing in popularity. According to wangdaizhijia.com, the Internet lending business in China topped 96.35 billion yuan during the first half of 2014.

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