New rules coming for China's P2P lending companies

China's banking regulator will soon issue a new regulation to manage the country's increasing number of peer-to-peer financial companies such as the leading P2P lender Renrendai.com, Yan Qingmin, vice chairman of the China Banking Regulatory Commission said on Sunday.

Though most of the P2P companies like Renrendai have so far been developing in healthy conditions, they still need more monitoring, Yan told the Shanghai Finances Institute Annual Conference 2014 in Huangpu District.

"Renrendai.com should firstly make it transparent between the borrowers and the lenders and then build a mandatory real-name system," Yan said.

He said they should mostly be prevented from developing into a capital pool or transforming into a social organization along with guarantee companies.

"It has risks if the P2P lenders operate like normal lending organizations to establish a capital pool and then lend money," he said.

China so far has over 600 P2P companies that serve as online platforms between individual or company lenders and borrowers. The transaction of the companies has reached over 50 billion yuan (US$8.05 billion).

Introduced to China in 2006, P2P lending refers to money loaned to unrelated individuals usually via online platforms. In most cases, they are unsecured personal loans and borrowers do not provide collateral against default. The loans carry high annual interest rates of up to 24 percent.

Wu Cheng, deputy governor of Huangpu District, told the forum that the district will offer better services to attract more internet finance companies to the district.

The rapidly increasing number of P2P lenders has prompted some calls for tougher regulatory supervision, as some of them are facing operational problems.

Some 74 P2P lenders went bankrupt or faced capital problems in 2013, according to early data from Wangdaizhijia.com, a Chinese P2P lending portal.