Consumer Attitudes Towards Debt - China - July 2014
“In the near future, the biggest opportunity still lies in loans for financing large household purchases. Consumers want to have more say in the loan design, which is currently the biggest gap in the market.”
– Ruyi Xu, Head of Research, China
This report looks at the following issues:
- What drives people's openness to borrowing?
- What are the opportunities to grow consumption loans?
- How to market loan products to young adults
Consumer lending in China has grown from 2008 to April 2014. About two thirds of household lending is consumption loans, in which mortgage still have a dominating share. However the next decade of growth will be increasingly driven by short-term consumption loans. Mintel predicts that by 2020, total consumer lending will account for 68% of the GDP.
On the positive side, consumers are becoming more open-minded about borrowing money, in the sense that few think this is an embarrassing behaviour. Yet they still think borrowing should be the last resort and prefer to leverage savings or borrow from people they know.
Mintel research shows that there are a lot of business opportunities for financial service providers to better market their products and services, given the gaps in the market. With retailers keen to tap in to this by offering credit services, the future competition will not be limited to traditional service providers, namely banks. Those who are quick to understand consumers’ changing attitudes and needs will have a better chance to capitalise on the growing business of consumer lending.
For the purposes of this report, ‘debt’ includes a number of financial products, including both collateral and non-collateral loans borrowed from loan or credit providers.
This report focuses on loans to households rather than businesses. In China, this is mainly in the form of mortgage loans, car loans and other consumption loans, such as money owed on credit cards.
While in some countries consumption loans usually refer to money borrowed to finance consumable goods, such as fuel, food, etc, this report follows a wider definition of consumption loans used by PBoC, which includes mortgages, car loans, money used to finance home renovation, education, luxuries as well as general household purchases.
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