Chinese regulators target young people fueled by loans
Chinese regulators who have targeted sprawl Group of ants and the country’s growing online lending industry are driven in part by a desire to curb what they see as uncontrollable borrowing by the country’s youth – the same consumers who have contributed to the country’s economic growth, The Wall Street Journal (WSJ) reported.
The WSJ reported that before the pandemic, young buyers were taking out short-term loans to purchase goods, such as expensive cosmetics, electronic gadgets, and fine dining in restaurants. These young consumers were taking on debt that did not require traditional credit cards.
About half of short-term loans in China in 2019 were made under the new digital agreements, according to data from Fitch Ratings cited by the WSJ.
One feature of these loans, the WSJ reported, is that the issuers – Ant Group, for example – did not have significant stakes in them. But under regulations due to go into effect in 2022, companies issuing loans will need to own at least 30%.
“As long as the Internet platforms conduct financial operations, the capital adequacy ratio requirement should be the same as that of financial institutions,” Guo Shuqing, head of the China Banking and Insurance Regulatory Commission, said when announcing a new requirement, by PYMNTS. “Starting a business needs capital, just like starting a financial business. “
Meanwhile, the WSJ reported that what it called a “popular Chinese social media campaign” urges young people to get rid of their debts.
As an example of the government’s crackdown, the WSJ cited a November column published by Guo Wuping, an official with China’s banking and insurance regulator, who allegedly wrote that new online lending products were causing ” indebtedness of some low-income people and youth. traps.
According to the WSJ, Ant, controlled by billionaire Jack Ma, held $ 267 billion in consumer loans – about a fifth of the country’s short-term household debt – as of June. Much of the funding for loans offered through Ant’s Huabei and Jiebei products – they translate to “just spend” and “just borrow” – is distributed among around 100 banks.
The WSJ reported that Ant declined his request for comment, but recently presented plans to change the way he manages his digital lending business.