Owners and backers of internet lending platforms in China might look on with envy at the New York listing of the Lending Club, which went public last week at a valuation of almost $9bn, vastly exceeding analyst expectations.
Internet lending is booming on both sides of the Pacific, as banks everywhere cut back on lending to small and medium businesses and hapless individuals. In China, regulations bar Chinese banks from lending money to these borrowers at interest rates that bankers say would justify the loans, given the lack of proven cash flows and collateral. In the US, most banks these days are just too big to bother, in the face of the significant amount of capital they now have to set aside for such loans.
That means shadow banks on both sides of the ocean are filling the vacuum. In the US, the combination of new regulations and technology is giving rise to a new generation of shadow operators. In China it is the constraint of longstanding rules in a system that has outgrown them that has given rise to these new kinds of lenders.