China’s Youthful, Debt-Fueled Spending Spree Sparks a Reckoning



Chinese regulators attempting to rein in Ant Group Co. and a swelling online-lending industry have a target in their sights: the excessive, debt-fueled lifestyles of the country’s youth.

Leading up to last year’s coronavirus pandemic, a new generation of tech-savvy and free-spending citizens helped power rising consumption, a growing driver of China’s economy.

Many used short-term loans to pay for expenses such as prestige cosmetics, electronic gadgets and costly restaurant meals. They found credit easy to obtain, thanks to Ant and other Chinese financial-technology companies that provided unsecured loans to millions of people who didn’t have bank-issued credit cards. In 2019, online loans accounted for as much as half of short-term consumer loans in China, according to estimates from Fitch Ratings.

Now, new financial regulations are forcing lenders to reassess their business strategies and have sparked a reckoning about the American-style borrowing and spending habits of China’s younger population. Starting in 2022, Ant and its peers will have to fund at least 30% of the loans they make together with banks, a rule designed to make online lenders bear more risk.

Author(s): Xie Yu

Publication Date: 13 March 2021

Publication Site: Wall Street Journal