Greater Bay Area could be the key to reviving the struggling P2P lending market in China, according to DBS Bank. The industry has been surviving under severe pressure amid crackdown from the government.
P2P lending will grow
The Singaporean bank estimates that P2P lending will experience a 17% annual growth rate by 2030. This growth will be boosted because of the new economic and innovation hub and make it the fourth-fastest growing sector there. The new form of lending, where internet-based platforms match borrowers, and private investors who want to help small companies grow could become one of the most promising markets in China.
Ken Shih, the senior research director of DBS, said that the P2P lending market is expected to grow to one trillion yuan by 2030 in China. He emphasized that the Greater Bay Area, which focuses extensively on entrepreneurship and innovation will be a fertile ground for this industry to flourish.
“A capital-intense industry upgrade is inevitable, and P2P platforms can meet the financing needs of new business formats – small and micro companies in particular,” added Shih.
Why is the Bay Area so important?
The Greater Bay Area comprises of Macau, Shenzhen and Hong Kong along with eight mainland Chinese cities based in Guangdong. This region is already an economic powerhouse for the country, and President Xi Jinping envisions to create it into a leading global innovation hub that could rival the Tokyo Bay Area or the Silicon Valley.
According to DBS, the area covered by the scheme will go through an upgrade and will convert from a manufacturing base to a services-oriented economy. This will help in bringing more small start-ups in the region which have problems in borrowing from traditional banks. In this region, forecast the smart appliances industry will mark the highest growth rate of 30%. Online advertising will also grow huge, followed by P2P lending, which will the fourth highest growth making sector.
The P2P sector in China has been mired by controversy and scandal after it experienced a major boost in 2016. Last year, the total number of platforms offering these services lowered as the regulators were busy in bringing a stop to fraud and defaults. They were also trying to push back the weakening investor sentiment in the industry.
A trial registration process will also pilot in select cities later this year, which will further enhance the worries of the industry. The Economic Information Daily, a state-run media outlet reported that the program is designed to bring more clarity to business boundaries and registration threshold of the remaining P2P business.