800 million yuan ($118.4 million) in loans have not been paid back by borrowers, Hongling's president Zhou Shiping said
The company will now wind down its existing products, he told Caixin.
"We don’t have much confidence in the online lending industry. Our platform has been struggling with it, by relying on other business lines the corporation has, and it seems we can hardly make it through," Zhou said.
The firm will continue listing new borrowers on its website, but will limit the length of products to under three years, Zhou told Caixin.
It will also sell properties that borrowers have pledged as collateral.
The Chinese government said this month that it will delay P2P regulations that bar online lenders from guaranteeing principal or interest on loans they facilitate, cap the size of loans at 1 million yuan ($149,000) for individuals and 5 million yuan ($743,000) for companies, and force lenders to use custodian banks, Caixin reported.
Technology expert Paul Haswell of Pinsent Masons, the law firm behind Out-Law.com said: "This development is unsurprising. P2P lending has been a major part of China’s shadow banking industry, and an increasingly indebted population have been turning to easy to obtain loans using P2P lending, often then using those loans for other investments. Unfortunately, defaults are common and it is not easy for P2P lending platforms in China to recoup the losses they suffer as a result of defaulters. This has been an issue for P2P lending platforms globally, but it seems to be an especially sharp problem in China."