China tightens supervision of micro lenders' debt levels

BEIJING (Reuters) - China's banking and insurance regulator set caps on the amount of capital that micro lenders can raise in the debt market, in rules issued on Wednesday, as the government tightens supervision to curb financial risks.

The new rules, released on the website of the China Banking and Insurance Regulatory Commission (CBIRC), require micro lenders to control their debt levels.

Outstanding loans from other banks, from shareholders and other non-standard sources of funding must not surpass their net assets, according to the rules.

Outstanding bonds and other securities issued should be less than four times their net assets.

China's micro lenders mainly target the country's small companies, and low-income groups who need capital but find it hard to obtain loans from the banking system.

The number of micro lenders bloomed to its peak of nearly 9,000 in 2015 nationwide before shrinking to 7,333 at the end of June, as regulators reined in financial risks in the non-bank industry over the past few years.

Outstanding loans extended by micro lenders stood at 884.1 billion yuan ($130.8 billion) as of end of June, central bank data showed, including loans issued by micro-lending units of tech giants such as Ant Group, Tencent Holdings and JD.com.

To support the economy hit by the coronavirus pandemic this year, the regulator separately encourages micro lenders to lower interest rates on loans that they offer to clients, according to the rules.

Loans to clients who invest the funds in stocks, financial derivatives and illegal property projects are forbidden, it added.

(Reporting by Cheng Leng, Lusha Zhang and Ryan Woo; Editing by Alex Richardson)