China suspended new registrations of finance companies nationwide as authorities started a crackdown on Internet finance, business magazine Caixin reported, citing unidentified people familiar with the matter.
Applicants with finance-related names or businesses can no longer simply register with local offices of the State Administration for Industry & Commerce, Caixin reported Thursday. Firms will instead first need approvals from financial regulators, it said.
The change is part of a campaign to clean up online finance that began April 14 and will end by January next year, the magazine said. China Business News reported on Thursday that the government’s efforts will last for a year.
The central bank is leading the campaign, involving multiple government agencies, Caixin reported previously.
Policy makers are cracking down on Internet-based unconventional financing that threatens to undermine financial stability and stoke social unrest after the failure of thousands of online peer-to-peer lenders, some suspected of fraud. Online financing added fuel to last year’s stock bubble.
While the government calls it a “special Internet finance crackdown,” the campaign also covers some offline financial businesses such as wealth management, according to China Business News. The initiative will focus on areas such as third-party payments, peer-to-peer lending, crowdfunding and online insurance, according to the news service.
“This is a necessary move,” said Zheng Chunming, a Shanghai-based analyst at Capital Securities Corp. “The government is cracking down on Internet finance as the business is developing too rapidly and more problematic platforms have emerged.”
The tightening of registrations is intended to cover businesses including exchanges, fund and investment managers, private equity, online finance, peer-to-peer lending, crowdfunding, Internet insurance and payments, Caixin said. Cities including Shanghai, Shenzhen and Beijing had already halted registrations, it said.