Name
Global FinTech Guide
Country _ Name
China
SectionTitle
Loan services/factoring/loan broking/finetrading
Body
FinTechs belonging to this category act as a loan creditor (even short and very short-term loans), are broking loans or receivables or conduct factoring of loans, which were given to private or business customers. In this business area you also find “peer-to-peer” (P2P) services, in which FinTechs enable a multitude of users to give loans (and brokered by the FinTech-platform) to other users or companies.

Finetrading is hereby a financial service of FinTechs, where they buy due receivables and grant the debtor an extension of payment time. 

As an ancillary service some FinTechs offer alternative credit assessment services to check the solvency of a borrower.

Introduction

Attitude of the country towards loan-giving-, factoring-, brokerage-, finetrading- and ancillary services

Liu Fushou, the Managing Counsel of CBIRC (already replaced by NFRA), explained at the Annual Meeting of Finance and Economics 2021: Forecast and Strategy that the operating P2P online lending institutions were cleaned up from the market during the past few years. As of November 2020, the number of operating P2P platforms has decreased from 5000 to zero, which means that the P2P business has now been expelled from the Chinese market.

Notwithstanding the above, there are still licensed and specialised companies that are providing relevant services. Generally speaking, the loan-giving and brokerage businesses are carried out by microlending companies; the factoring business is carried out by commercial factoring companies; the finetrading business is carried out by the financial asset management companies.


Legal affairs

Obligations and requirements to provide loan-giving-, factoring-, brokerage-, finetrading, and ancillary services described above
Firstly, engaging in the microlending business requires a special license. In accordance with the Interim Measures for Supervision and Administration of Microloan Companies promulgated by NFRA in 2024, a microlending company engaging in microlending business shall obtain the approval of the provincial-level NFRA. The microlending company shall only carry out all or part of the following business: (i) issuance of micro-lending; (ii) acceptance and discounting of commercial bills; and other businesses as prescribed by laws and administrative regulations and as approved by NFRA, and shall not issue or act as an agent in the sale of financial products such as wealth management products, trusts, or funds, and shall not purchase financial products other than fixed-income securities, In additional to the nationwide regulations promulgated by NFRA, local NFRAs have established more detailed requirements for the incorporation of a microlending company. For example, in Beijing, the registered capital of a microlending company shall not be less than RMB 100 million (equivalent to approximately USD13.94 million or EUR11.89 million), which must be fully paid up in a single installment. The legal person shareholder of a microlending company shall be in sound financial condition, have recorded profits in each of the two most recent fiscal years, and shall not have an equity investment balance exceeding 50% of its net assets. The Individual shareholder of a microlending company shall has an average annual income of no less than RMB 400,000 (equivalent to approximately USD5,5760 or EUR47,576) over the past three years or household net financial assets of no less than RMB 3 million (equivalent to approximately USD418,200 or EUR356,821), with tax records consistent with their income or asset situation. Secondly, engaging in the factoring business requires a special license. The applicants for factoring should check the local rules to get knowledge of the market access requirements. Generally speaking, such rules will include the financial requirements. For example, in Beijing, the initial paid-in registered capital for a proposed factoring company shall be not less than RMB100 million (equivalent to approximately USD13.94 million or EUR11.89 million), and its shareholder shall be profitable for the latest two consecutive accounting years and have a net asset not less than twice of the amount of capital contribution at the end of the latest year.

Last, dealing of the non-performing assets requires a financial asset management license (AMC license). The market access requirements for the AMC license are quite strict, including (i) the provincial government will in principle only establish/authorise one (1) local AMC company to engage in the batch acquisition and disposal of non-performing assets of financial enterprises within the scope of the province; (ii) the minimum paid-in registered capital shall be RMB10 billion (equivalent to approximately USD1394 million or EUR1189.4 million).

Additional comments regarding the legal situation for loan-giving-, factoring-, brokerage, finetrading-, and ancillary services or what FinTech’s must be aware of in this business area

Coupled with the clean-up of the P2P platforms, CBIRC (already replaced by NFRA) has issued the Strengthening the Supervision and Administration of Microlending Companies
in September 2020, imposing a series of operational requirements, such as asking the microlending company to monitor the use of the loan, set up the interest in a reasonable manner, conduct the debt collection in a proper way etc. FinTechs in this area should be cautious about their business operation and about keeping compliance.


Economic conditions

Market size for loan-giving-, factoring-, brokerage-, finetrading- and ancillary services and biggest companies in this business area

A. P2P business has now been expelled from China's market.
B. Since 2016, with the implementation of relevant regulations and the supervision of competent authorities, the microlending companies that have been poorly managed, non-compliant, or operated in an irregular manner have gradually been phased out. According to the statistics from PBOC, there were 5257 microlending companies nationwide by the end of 2024. The loan balance was RMB753.3 billion (equivalent to approximately USD105 billion or EUR89.6 billion), with a decrease of RMB14.8 billion (equivalent to approximately USD2.1 billion or EUR1.8 billion) compared to the previous year. At present, most microlending companies in China are concentrated in Jiangsu Province, Chongqing province and Guangdong Province. The biggest microlending companies are mainly those run by the big internet groups, such as Chongqing Ant Consumer Finance Co., Ltd. of Ant Group, JD.com Asia Devel Opment Limited of JD and Psbc Consumer Finance Co., Ltd. of China Post etc.
C. In late 2022, the China Banking Association released the China Factoring Industry Development Report (2021-2022). According to the report, the volume of domestic factoring business in 2021 is RMB3.25 trillion (equivalent to approximately USD450 billion or EUR419 billion), representing an increase of 44.44% from the previous year. With respect to commercial factoring, most of the factoring companies with large business scale are invested and established by state-owned enterprises, central enterprises, and large listed enterprises, mainly serving the small and medium-sized enterprises upstream and downstream of the industrial chain or platform. D. According to NFRA, commercial banks had a non-performing loan balance of RMB340 billion (equivalent to approximately USD474 billion or EUR404 billion) in the first quarter of 2025, with a non-performing loan ratio of 1.51%. (Source: NFRA,  https://www.nfra.gov.cn/cn/view/pages/ItemDetail.html?docId=1209103&itemId=915&generaltype=0, May, 16, 2025.) There is still room for increment in the non-performing asset market. There are only five national financial asset management companies in China, namely Orient, Cinda, Great Wall, Huarong and Galaxy.

Additional comments regarding the economic situation for loan-giving-, factoring-, brokerage-, finetrading- and ancillary services or what FinTech’s must be aware of in this business area

Whether it is microlending, factoring or non-performing assets disposal, the trend of deeper integration with FinTech will improve its market scale and market operation efficiency. However, the potential stricter supervision at the regulatory level might limit further development of the market.



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