Consumers in China Can Apply for Loan Too Easily

It appears that the Chinese consumer can apply for a loan too easily. Moreover, the borrowed amounts are often too high. The Chinese government is trying to stop the growth of new lenders with new loan rules. The current Lakala chief, a loan platform in China, writes that the government must now intervene.

If they do not do that and the government does not seize all the resources to tackle the ‘shadow banking’ sector, then a similar crisis can break out like in America a few years ago. The top man of Lakala is Mr. Zhang Jianhua. Their office is located in the metropolis of Guangzhou. A city in the south of China.

Explosive growth of consumer loan

 

Zheng knows what he is talking about. Because he himself is active in the consumer loan sector. In China, this sector showed tremendous growth. For example, in the 3rd quarter of 2017 no less than 8610 different companies served the Chinese consumer. And only a few hundred of these 8610 loan providers have the right documents in-house. In total, in the third quarter of 2017, an amount of 12.5 billion in loans was granted to these providers.

IMF

It is the pace of the increase in debts in China that is worrying for the IMF, but also for connoisseurs of the Chinese economy. The IMF calculated that in 2022 the debts could turn out to be about sixty percent of GDP. Also in a report, the IMF warned this month about the growth in the number of debts in China. In a few years, household debt has risen from 29 percent to 46 percent of GDP. It is also remarkable that these households are actually closing the gaps on the government balance sheets with their loans. Incidentally, the Dutch consumer is also deeper in debt .

Where are the loans from?

Where are the loans from?

The market for mini-exercises in China is also chaotic. For example, Chinese consumers could simply close multiple mini-loans on various platforms. And according to Mr. Zhang, it is unclear who has these small loans outstanding. Incidentally, some providers calculated interest rates up to 36% on these loans.