THE regulator in China’s financial center has ordered Shanghai’s more than 40 peer-to-peer (P2P) lenders to exit the business, Bloomberg News quoted sources familiar with the matter as saying Friday, the latest blow to an online industry that’s shrunk by half this year.

Some of the nation’s biggest platforms including Ping An-backed Lufax and Dianrong.com have been told in recent meetings with Shanghai’s financial services bureau to stop issuing new products and to wind down existing peer-to-peer lending services, the sources said.

The development indicates China’s determination to overhaul an industry that had more than US$150 billion of loans outstanding and upwards of 50 million investors at its peak, but was plagued by fraud and defaults. Even the biggest players aren’t being spared after the sector came in for special scrutiny under the crackdown on financial risk.

Shanghai’s Internet finance industry body Wednesday denied a media report saying the city’s P2P platforms signed an agreement to terminate their businesses. The regulator verbally communicated with the platforms without giving a deadline, according to the sources.

China’s P2P online lenders were meant to boost inclusion by giving small borrowers a new financing channel and allowing savers access to double-digit yields. Some 1,200 P2P companies closed down in the first nine months of the year as loans outstanding tumbled 48 percent, according to the China Banking and Insurance Regulatory Commission.

There were about 600 lenders operating across the country as of September, down from a peak of 6,600, data from Shanghai-based research firm WDZJ show. Only around 50 may survive, Citigroup Inc. analysts estimated in November.

(SD-Agencies)