Credit and Loan Products - China - July 2016
“How credit and loan products could be designed and operated is more influenced by regulators than providers. In China, benefiting from the Inclusive Finance policy, internet finance players like peer-to-peer lending firms, internet-based banks and equity crowdfunding platforms are thriving. Consumers are enjoying the convenience resulting from the competition between these operators and traditional banks. Failures should be noticed, but they should not be overemphasised. With more proper regulations, the household loan market is expected to continue to grow with more responsible firms and innovative products.”
– Aaron Guo, Senior Research Analyst, China
This report answers the following key questions:
- What could be learnt from internet-based financial players?
- Is the penetration of credit cards coming to an end?
- How to attract young adults to apply for loans?
There is much talk in the market how China faces an increasingly high bad debt ratio, that irresponsible companies are raising funds illegally and how Chinese consumers are refusing to borrow. So what is the real situation? This report will look at credit and loan products for households in China, from the perspectives of regulators, loan providers and borrowers. This report contains three main sections – The Market, Key Players and The Consumers, and discusses three key issues – what could be learnt from internet finance businesses, whether or not the penetration of credit cards is reaching saturation, and how to attract young adults to apply for loans.
For the purpose of this report, the credit and loan products discussed are a number of financial products, including both collateral and non-collateral loans, borrowed from loan or credit providers by households.
In China, this is mainly in the form of consumer loans, such as money owed on credit cards, and operating loans to households for the purpose of running businesses. Both forms are included and discussed in this report.
While in some countries consumer loans usually refer to money borrowed to finance the purchase of consumer goods, such as fuel, food, etc, this report follows a wider definition of consumer loans used by People’s Bank of China (PBoC), which includes mortgages, car loans, money used to finance home renovation, education, and luxuries as well as general household purchases. Loan providers could be traditional banks, internet-based banks, peer-to-peer lending companies and other financial institutions, or non-financial institutions like online retailers that provide credit services.
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