Bad loans on Chinese P2P lending sites exceed USD 6.5 B in 2015

Yuandongtian, a platform for disposing of non-performing assets, and Lingyi, an Internet finance research institute, jointly released a 2015 Internet non-performing assets disposal report in China on Tuesday.

According to statistics from the report, the outstanding balance of loans made through online channels was about RMB 425 billion (USD 65 billion) in China in 2015 and the amount allocated to bad loans was anywhere between RMB 42.5 billion ( USD 6.5 billion)and RMB 63.8 billion ( USD 9.8 billion) at the end of 2015.

A bad loan is a loan that is unlikely to be paid back after the liquidation of the borrower for various reasons including bankruptcy, death according to law, catastrophic natural disaster or accidents. Accountants advise creditors to write off the full amount of bad debt on profit and loss statements or create a provision for bad debt as soon as it is foreseen.

Peer-to-peer lending, sometimes abbreviated P2P lending, originated as a niche alternative source of financing for individuals or businesses through online services that match lenders directly with borrowers. Since the P2P lending companies offering these services operate entirely online, they can run with lower overhead and provide the service more cheaply than traditional financial institutions. The idea is that both lenders and borrowers benefit from better rates than they could get from financial institutions.

With the Internet finance boom following the announcement of China’s Internet Plus policy, P2P lending entered an explosive stage of development in China in 2014. With the popularity of P2P lending, the model is branching into more specialized lending markets such as student loans, commercial lending, real estate lending, and even franchise lending.

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