15th June 2022
(Yicai Global) June 15 — Chinese e-commerce giant JD.com has shut down a small loan subsidiary in order to comply with the country’s new restrictions on lending by internet-based giants.
Beijing Jinghui Small Loan has had its microlending permit cancelled on the request of JD.com unit Jingdong Technology Holding, the Beijing Local Financial Supervision and Administration said on June 13.
Jingdong Technology, which also runs three other micro loan arms in Chongqing and Shanghai, is amalgamating its financial licenses following new rules brought in in late 2020, which limit a single company to only hold stakes in a maximum of two online lenders, and to only control one of them, a company source told Yicai Global.
At present JD.com has the most microlending arms in the country with three, followed by Alibaba Group Holding’s affiliate Ant Financial Services Group, which has two. The Beijing-based company plans to downsize to just one microlending unit eventually to comply with the regulator, the person said.
Consumer finance firms can only lend out around 10 times their registered capital, and they need CNY5 billion (USD748 million) in the bank in order to carry out business nationwide, the People’s Bank of China and the China Banking and Insurance Regulatory Commission said in November 2020.
By regulating the microlending activities of big tech firms, the entire industry can better support the development of micro and small businesses as well as the local economy, even though the number of such firms will shrink in the process, industry insiders said.
There were 6,232 small loan firms in China at the end of the first quarter, a 30 percent drop from 2015, according to central bank data. At its peak the sector hired 110,000 people, but there are much fewer employees now.