Chinese regulators that Ant Group Co. and trying to curb a growing online credit industry have one goal in mind: the excessive, debt-fueled lifestyles of the country’s youth.
In the run-up to last year’s coronavirus pandemic, a new generation of tech-savvy and free-spending citizens helped fuel rising consumption, a growing engine of the Chinese economy.
Many used short-term loans to pay for expenses such as luxury cosmetics, electronic gadgets, and expensive restaurant meals. They found credit easy to obtain, thanks to Ant and other Chinese financial technology companies providing unsecured loans to millions of people who did not have bank-issued credit cards. According to Fitch Ratings estimates, online loans accounted for as much as half of China’s short-term consumer loans in 2019.
Now, new financial regulations are forcing lenders to reassess their business strategies and have led to a settling down on the US borrowing and spending habits of China’s younger population. Beginning in 2022, Ant and his colleagues will have to finance at least 30% of the loans they take out with banks, a rule designed to make online lenders more risky.
In recent weeks, a grass-roots campaign on Chinese social media called “come ashore” – a metaphor for getting debt-free – has gained momentum, with people sharing their experiences and regrets about overspending and borrowing.