Chinese P2P lending continues to surge as new rules come into play
P2P lending in China rose to a record high of $13.3bn in July, up 25.1% MoM, taking the total raised to $123.5bn. Growth in P2P lending and associated problems has incited regulators to impose new rules on the sector. Last month 109 platforms allegedly committed fraud, or made it difficult for investors to withdraw. New rules announced on 18-Jul by the People's Bank of China mean that online sites can only act as intermediaries between lenders and borrowers and can no longer raise funds themselves to lend out. 
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CHINA'S peer-to-peer lending transaction rose to a record-high of 82.5 billion yuan (US$13.3 billion) in July despite strict regulator being imposed on the industry, according to a report on Sunday.

The transactions jumped 25.1 percent from June, and nearly up 3.8 times from a year earlier, raising total volume of the industry to 766 billion yuan so far since eight years ago, according to Online Lending House, a web portal that tracks the sector.

"Tightened regulation on off-market financing by P2P platforms last month didn't put influence on the transaction volume since that part of business was small, and the volatile stock market bring investors back to P2P industry," said Ma Jun, chief research officer at Shanghai Ying Can Investment Management Consulting Co.

The annual transactions involving P2P websites are estimated to exceed a trillion yuan this year due to the needs of raising funds, according to Online Lending House.

P2P lending, which allows individuals to borrow money from other individuals without going through banking system, is booming in China. Borrowers get easier access to loans, and lenders are able to charge higher interest rates.

But the industry will embrace the biggest reshuffle in the second half of 2015 after eight-year development, as the People's Bank of China announced new rules on July 18 that require the online sites to serve only as intermediaries between lenders and borrowers, and banned them from "enhancing borrower creditworthiness" by raising funds of their own to lend out.

"Beside the operation risks P2P platforms are facing, the policy risks will get more highlighted," Ma said. "Closing down in a large scale will be the new normal of this industry."

A total 109 platforms were alleged to commit fraud or making it difficult for investors to withdraw cash last month among 2,136 online lenders, pushing problematic sites up to 528 during January to July, compared to 275 problematic reports for the whole of last year.