Chinese microlenders are plunging on US exchanges after new regulations at home

  • Qudian and PPDai each dropped more than 13 percent in morning trading.
  • Both companies offer online microloans — as low as $100, in some cases — to Chinese consumers.
  • The move could signal greater regulation to come for existing players, with users beginning to push back on high interest rates from noninstitutional lenders.
Qudian Inc. CEO Min Luo, center, signs the New York Stock Exchange guest book to celebrate his company's IPO, Wednesday, Oct. 18, 2017.
Richard Drew | AP
Qudian Inc. CEO Min Luo, center, signs the New York Stock Exchange guest book to celebrate his company's IPO, Wednesday, Oct. 18, 2017.

Two recent Chinese IPOs are plunging on U.S. exchanges Tuesday following news that the Chinese government is eyeing greater regulation in the microlending industry.

Qudian and PPDai each dropped more than 13 percent in morning trading. Both companies offer online microloans — as low as $100, in some cases — to Chinese consumers.

The Chinese government issued an urgent notice on Tuesday suspending regulatory approval for new internet microloan companies to enter the space, sources who had seen the notice told Reuters.

The move could signal greater regulation to come for existing players, with users beginning to push back on high interest rates from noninstitutional lenders.

The industry has taken off recently, as Chinese consumers increasingly turn to online lenders to make even minor purchases. Consumer lending through Chinese online platforms more than tripled last year to almost $140 billion, according to a recent report by the Cambridge Centre for Alternative Finance.

Qudian and PPDai both started trading in the American markets in the last month or so. Qudian initially spiked in its debut, but has suffered since. PPDai, debuting weeks later, held mostly flat before Tuesday's drop.

— Reuters contributed to this report.