China suspends registrations of finance firms

[SHANGHAI] 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 will be for the duration 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.

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.

"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 new rules are intended to cover businesses including exchanges, fund and investment managers, private equity, online finance, peer-to-peer lending, crowdfunding, Internet insurance and payments, the magazine said.

Cities including Shanghai, Shenzhen and Beijing have already halted registrations, it said.

The government will revoke licenses for existing finance firms that fail to pass inspections during the crackdown, Caixin said.

BLOOMBERG