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Fintech Shares Plunge As China Suspends Issue Of Online Micro Lending Licenses

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Chinese government has clamped down on online micro lending by suspending new issuance of online micro lending licenses, which are required for lenders to offer loans across the country, according to local media.

The news sparked sharp declines in the price of shares of several newly listed fintech companies, with PPDai, Jianpu Technology and Qudian plunging 14.1%, 10.81% and 3.83% respectively.

A notice put out by China’s Internet Financial Risk Special Rectification Work Leadership Team Office, a regulatory body tasked by the central government to rein in risks in online financial sector, asks local governments to stop issuing new licenses. Previously, licenses are obtained through local regulators.

This is the regulator’s second move to clamp down online lending since February when China’s Banking Regulatory Commission launched a national inspection on online lending activities and closed down businesses without licenses. Local media reports that a more comprehensive document targeting online lending will be introduced before the end of this year.

The document will specify annual interest rate exceeding 36% to be illegal and will discourage pure lending platforms, compared with lending activities provided by consumer finance companies such as e-commerce.

As China continues to reduce financial risk, online financial platforms have always been a concern for the regulator. This year has seen some Chinese fintech companies rushed for going public in the U.S. before more regulatory control is imposed.

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