Chinese credit rating agency Dagong recently released its first internet finance blacklist and early warning list, according to a company statement. Dagong stated, “the number of peer to peer platforms that appeared to have various risks such as blocked withdrawals, platform closure and flight is 275, which is 3.6 times that of last year. Last December alone witnessed 92 platforms with problems, which surpassed the total number of similar platforms last year. The frequent occurrence of risk incidents will not only impair the development ecology of the internet finance sector, but also contain huge systemic financial risks”.
Dagong Global Credit Rating Co., Ltd. was founded in 1994 upon the joint approval of The People’s Bank of China and the former State Economic and Trade Commission. As one of the earliest credit rating agencies in China, Dagong has been promoting the “healthy development” of the finance industry and actively exploring the credit rating theories.
According to Want China Times,
“Dagong is responsible for maintaining and safeguarding national financial security. From its research on internet finance, the company has developed and launched the “four-in-one” credit risk control model — unlimited access to debtor information, public supervision of creditors, professional monitoring of platforms’ credit rating and publicly available blacklists. The release of the first blacklist and early warning list complies by these standards.”
When Dagong published its first 1,055 Internet finance credit evaluation reports in August 2014, none of which reached a rating of Ai or above. On the heels of the Jan. 21 announcement, Internet finance companies and related industry associations strongly reacted to the news, according to the Shanghai-based National Business Daily. Several unnamed executives in the peer-to-peer lending industry called the move unprofessional, complaining that Dagong has not provided a basis for who is put on the list, according to Want China Times. And as for the early warning list, several executives whose companies have been named said it is purely speculation.
The Beijing Internet Finance Association issued a statement to question the feasibility and accuracy of Dagong’s blacklist and early warning list, and shortly thereafter, the Guangdong branch called for an explanation for the report.
Dagong states that China’s Internet finance sector has quickly grown, and credit risk cases are common. One estimate stated that peer to peer lending in China would rise to approximately $5 billion in average monthly volume by the end of 2014. Dagong’s report noted that the frequent risk of conducting internet finance will only continue to impair the development of the sector. Risk in the internet finance sector is concentrated in Beijing, Shanghai, Guangzhou and Zhejiang, according to Dagong.