(Yicai) Jan. 24 -- Shenzhen Zhongrong Petty Loan has refuted a rumor that the small loans business of Douyin, the Chinese version of TikTok, has extended loans worth almost CNY400 billion (USD56.4 billion).

The rumor about the loan balance is false, Zhongrong Petty Loan said through the official social media account of Beijing-based Douyin late on Jan. 22.

A recent self-media report claimed that the balance of online petty loans granted by Douyin is close to CNY400 billion thanks to the short-video platform's traffic. Fangxinjie and Douyin Pay Monthly are some financial products in the My Wallet section of Douyin’s app.

Douyin indirectly holds a 95 percent stake in Zhongrong Petty Loan, which has the only credit business license owned by the video platform, according to corporate information site Qichacha.

Zhongrong Petty Loan has not publicly stated how much money it has lent out, industry insiders told Yicai. As it has hiked its registered capital and applied many times to issue asset-backed securities in recent years, Douyin’s lending business is clearly big, they added.

Zhongrong Petty Loan raised its registered capital to CNY19 billion from CNY9 billion on Dec. 29, making it China’s highest capitalized micro lender. The firm had previously increased its share capital several times from 2021 to 2022. A higher registered capital means Zhongrong Petty Loan can raise more money and grant more loans, an industry insider pointed out.

The balance of money raised by a firm doing online petty loan business by non-standard financing channels, including bank and shareholder loans, should not be more than its net assets, while that by standard financial channels of issuing bonds and ABSs should not exceed four times its net assets, according to Chinese finance regulatory rules. A small loan company should also provide at least 30 percent of a syndicated loan.

Under China’s financial rules, the balance of non-standard financing channels of online micro lenders, including bank and shareholder loans, should not exceed its net assets, while that of standard financing channels for bonds and ABS should not exceed four times its net assets.|

So based on its registered capital, Zhongrong Petty Loan can raise up to CNY95 billion and theoretically grant a syndicated loan of over CNY300 billion, though that does not mean the firm can and has issued loans of that size.

Most users of Douyin's financial products have penned contracts with Zhongrong Petty Loan and other firms, Yicai found. That makes it difficult to estimate the scale of the loans it has granted, as different lenders made some of the loans, an industry insider noted.

Editor: Martin Kadiev