Chinese customers demand tighter rules for online platforms

By Chen Qingqing Source:Global Times Published: 2018/8/29 20:43:42

Rising problems seen with online platforms

Investors wait outside the office of a peer-to-peer platform that was charged by the police with illegally absorbing public funds in Shanghai on Monday. Photo: IC

China's digital economy has been booming in recent years, but some participants have pursued earnings at the expense of public interests, experts warned on Wednesday. Management of online platforms should be further enhanced and preventative measures are needed to ward off a potential crisis, they warned.

Since the beginning of this year, internet companies have been facing mounting pressure due to a lack of financing channels and weak investment, which has been exacerbated by the ongoing trade tensions between China and the US, Liu Dingding, a Beijing-based industry expert, told the Global Times.

"The sluggish economy is weighing on firms that already had difficulty in attracting more capital," he said.

China's digital economy accounted for 32.9 percent of the country's total GDP in 2017, and the internet has become more widely used in various different sectors, according to a post published on the central government's website in April. In 2017, the total market scale of the digital economy reached 27.2 trillion yuan ($3.99 trillion), it said.

But some Chinese internet companies have been entangled in management troubles, and many have been forced to close.

For instance, in the peer-to-peer (P2P) lending sector, 642 companies suspended their operations from January to July, an increase of 210 compared to the same period in 2017, industry website reported on August 20. And by the end of July, the number of P2P firms that were in trouble reached 2,305.

The P2P crisis reflects not only economic pressure but also tight market liquidity amid deleveraging in the financial sector, which has led to rising corporate debt defaults, the report said.

Besides online finance, problems have also emerged in the online housing and transport sectors. Some realtors apply for bank loans by providing the lease agreements with tenants, which has become a major way for online platforms to seek more capital.

A company called Dingjia in Hangzhou, East China's Zhejiang Province, recently announced it had gone bankrupt, with some tenants owed as much as 400,000 yuan due to the collapse of the platform, media reports said.

Regulation needed

The government has been encouraging innovation and start-ups, which have helped to boost the job market, Li Yi, a senior research fellow at the Internet Research Center under the Shanghai Academy of Social Sciences, told the Global Times on Wednesday.

"However, now it's time for rules and regulations to catch up with new industries," he said.

Some experts have also called for an increase in legal liabilities for internet companies.

Two female passengers have been killed by drivers this year while using China's largest car-hailing platform Didi Chuxing, and experts said there is an urgent need for related laws and regulations for the online car-hailing industry.

"There must be more clarity about what the basic requirements are for companies and regulators," Shen Lijun, director of Urban Think Do Tank, told the Global Times.

Also, the authorities should not wait until incidents happen to impose regulations, and more preventative measures should be taken, Liu noted.

"For example, the number of car accidents in the food delivery sector has been rising lately, and the authorities should come up with protective measures for delivery couriers before it's too late," Liu said.

In a letter of apology issued on Tuesday night, Didi founder Cheng Wei and CEO Liu Qing said the car-hailing platform will stop using scale and growth as their measurements of success.

"Administrative measures, social responsibility and technical tools are expected to become much more binding for corporate performance," Liu noted.
Newspaper headline: Tighter internet rules urged


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