Chinese regulators cut online lending and debt-fueled spending

The growth of the Chinese luxury market in 2020 is due in part to the rapid adoption of e-commerce following last year’s Covid-19 outbreak. BoF.

Starting next year, fintech players like Alibaba subsidiary Ant Group will be required under the new regulations to fund at least 30% of the loans they make to banks – a move that could moderate spending by young Chinese buyers. The Wall Street Journal reports.

In recent years, online loans have helped boost consumption among a population eager to own the latest luxury goods but unable to afford them. A 2019 HSBC survey found that China’s post-1990s debt-to-income ratio was 1,850%; for comparison, Canada’s ratio for millennials is estimated at 216%.

From the highest echelons of government to internet users on social media, debt and overspending have become hot topics. At the same time, there have been shifts among shoppers keen to adopt more frugal and minimalist lifestyles, as a small but growing movement against heavy spending coincides with calls for sustainability and conscious consumption.

Last week, Ant Group said as part of its self-regulatory efforts, its credit payment company Huabei and short-term consumer loan provider Jiebei would responsibly lend and deny loans to young borrowers or low income beyond what is needed to cover basic living. expenses. But given Beijing’s interests in maintaining China’s economic momentum, the extent to which regulations will affect consumption in the long run remains uncertain.

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David A. Albanese

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