The online lending industry, once dominated by fintech giants such as Ant Group, Tencent-backed WeBank, ByteDance, Meituan, and Baidu, had faced heavy regulatory scrutiny since 2020. Authorities suspended Ant Group’s initial public offering, imposed fines, and forced major companies to restructure their financial operations under stricter banking-like rules.
In August, the government introduced consumer loan interest subsidies, allowing internet platforms to participate alongside traditional banks, signaling a more accommodative regulatory approach. Industry insiders interpreted this, alongside high-level meetings between Chinese leaders and private-sector executives, as a green light to cautiously expand lending.
“The regulatory landscape has become more accommodative,” said one source, noting that the current economic slowdown has increased the reliance on large internet finance platforms. “At this point, expansion is a strategic choice and no longer a regulatory constraint,” echoed three other anonymous industry participants.
Analysts warn that while the easing of regulatory pressure could boost growth, authorities are likely to tighten oversight again if defaults spike. UBS projects that online lending through internet platforms will grow 7.6% in 2025 to 5.4 trillion yuan ($758 billion) and continue expanding at a 7.4% compound annual rate through 2029. Profits in the sector are expected to rise 9.8% to 110 billion yuan this year, reflecting more stable regulatory conditions.
The revival comes after several years of caution, when fintech firms were forced to fold financial services into holding companies with higher capital requirements and restrictions on using consumer data for credit scoring. By 2023, most major platforms had completed the restructuring, yet many remained hesitant to expand. That caution has started to dissipate this year, particularly after high-profile interactions, such as Alibaba founder Jack Ma attending a meeting chaired by President Xi Jinping.
Consumers are beginning to notice the increased availability of online loans. In Shanghai, resident Yang Dongdong, 41, said she had been approached by loan agents more frequently this year, ultimately taking her first online loan to furnish her home. “These loans are so easy, so I thought, why not?” she said.
However, the growth comes with risks. Rising defaults are becoming a concern, driven by subdued income growth and a weak job market. In the first quarter of 2025, 74.3 billion yuan of non-performing loans were put up for sale, a 190% increase year-on-year, with consumer loans accounting for roughly 70% of this figure. Analysts estimate that 5-7% of China’s adult population may have defaulted or fallen behind on loan repayments.
Some borrowers have used online loans for refinancing or speculative investments, creating additional vulnerabilities. For instance, a car salesman in Fuzhou defaulted on 150,000 yuan owed to internet lenders, while a carpenter in Enshi city borrowed 300,000 yuan at 1.5% interest to speculate on gold and currency markets, ultimately defaulting after margin calls wiped out his trades.
Industry sources stress that regulators are keeping a close watch on emerging risks. “Make no mistake, the regulators still don't want any more risks,” one executive said. As platforms cautiously scale their lending operations, the challenge will be balancing growth, profitability, and financial stability in a recovering but fragile consumer credit market.