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Private companies in China are practised at staying one step ahead of their government. Western investors are less sure-footed. A Chinese crackdown on new online lenders has sent shares in micro-lender Qudian, which listed in the US last month, down by more than a fifth to trade below their listing price.

The Alibaba-backed credit service announced a $100m buyback programme amounting to less than 2 per cent of the public float on the same day that the news broke. Given it only just sold stock to the US public, and had negative equity of $357m as of June, this is a curious use of the proceeds. The move may, however, help prop up the value of chief executive Min Luo’s billion-dollar stake in the controlling share class.

China has not banned online lending for existing companies. But even if Qudian benefits from reduced competition, its business model is exposed to other regulatory headwinds. The People’s Bank of China on Friday said it would prohibit asset-management products that guarantee investment returns from next summer. The group relies on similar funding channels for its own lending activity. It records service fees for facilitating loans by trusts and banks, but remains liable for principle and interest shortfalls.

Qudian’s IPO occurred a day before the congresses of China’s Communist party. As expected, scrutiny regarding financial leverage soon intensified. Peer-to-peer lending platforms such as Ping An’s Lufax were already subjected to tougher rules earlier this year. Qudian’s bad loan ratio has also been called into question, after comments by Mr Luo that delinquent debt had been written off as charity payments to borrowers.

Investors should give the company a wide berth. A better bet is Ping An Insurance, which is refashioning itself as a financial data sponge. After a 120 per cent year-to-date rally it is the world’s second-largest insurer after Berkshire Hathaway. Even if the Chinese fintech frenzy fizzles, Ping An has a strong and legitimate business to fall back on.

Lex recommends the FT’s Due Diligence newsletter, a curated briefing on the world of mergers and acquisitions. Sign up at ft.com/newsletters.

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