In the news: PBOC cracks down on internet finance, IPO freeze opens up PE and Audi gives its China dealers aid

PBOC tightens online lending rules

The PBOC issued new guidelines over the weekend requiring online financing platforms to increase disclosure and send customers regular risk reminders, as the recent stock market crash has raised concerns over margin financing and the risk of ordinary citizens losing their money. The PBOC will supervise online payments, the CBRC will oversee online lending and P2P platforms and the CSRC will manage crowdfunding and online fund sales. The rules require online P2P sites to serve only as intermediaries between lenders and borrowers and ban them from enhancing borrower creditworthiness by raising their own funds to lend out. The rapid growth of internet finance has prompted regulators to rein in these riskier banking methods and wealth management products - the PBOC has acknowledged in its statement that "problems and hidden risks" need to be addressed. The online financing industry involves big players like Alibaba and Tencent, which recently launched online banks and have the resources and stability to re-adjust, but the move will see the smaller platforms (that have operated more or less like Ponzi schemes) going out of business.

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IPO freeze opens doors for alternative financings

China's suspension of new listings has opened up opportunities for private equity firms, hedge funds and sovereign wealth funds to fulfil private companies' funding needs. Private equity firms found it difficult to strike deals during the sharp bull-run in Chinese stocks, but the situation has now changed with the limited room to raise capital and illiquid market. Several companies whose IPOs were halted said they would fund their businesses using existing cash and bank loans for now, while some are still pursuing listing and others are looking for alternatives. Yes, this could spell boom times for PE firms, but for how long? One has only to look at the fierceness of the government's efforts to arrest the stocks slide to realise that a full-on crash is probably not going to happen anytime soon. Things could change, of course, but companies would do well to wait to return to the stock market for fund-raising, rather than be beholden to PE firms.

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Audi gives China dealers financial aid

Audi is providing Rmb1.2 billion (US$193 million) in financial aid to its dealers in China following reduced sales targets for 2015 and slowing demand for luxury vehicles. Volkswagen gave its dealers Rmb1 billion and cut prices on several vehicles and offered incentives to buyers. Toyota offered Rmb1.24 billion this year to help meet the costs from excess inventory and BMW agreed to pay its dealers Rmb5.1 billion to cover losses after retailers stopped ordering cars from them. Renault's China joint venture also said in January that it will offer its dealers more rebates. Audi remains China's best-selling luxury carmaker. This is a U-turn from the good old days (which were, incidentally, just a couple of years ago) when every car company worth its wheels was waxing eloquent about China. Sales have dropped since then, especially for luxury cars, as President Xi Jinping cracked down on corruption and on extravagant officials. The slump in private wealth caused by the stock plunge in Shanghai will add to the problem, keeping cheque books unsigned for a while.

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