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I have several problems with this and I'm concerned by the number of people promoting this as a good thing: 1. "Nearly half of Huabei's users are under the age

by bArray 7y ago

I have several problems with this and I'm concerned by the number of people promoting this as a good thing: 1. "Nearly half of Huabei's users are under the age of 30 [..]". There is value in teaching young people to budget well and save for what they want or need. There's this feeling of "hard earned, well looked after" with many of the items I personally own. 2. Whilst the intention is supposedly good, I feel as if this is really a move towards putting large amounts of the Chinese population into a debt for (mostly) meaningless purchases. This isn't somehow generating more money for the average person, this just traps them into borrowing from their future selves at a worse rate. This doesn't lift people out of poverty, if anything it traps them in it. 3. "As of June, 1.6% of Huabei's outstanding loans were more than 30 days past due, while 1.2% were more than 90 days overdue, according to a document for bond investors.". That's 1% overdue every month! They compare this to credit cards, but it's a false equivalency. People getting credit card loans a) typically plan to get something that will hold value and b) there are fewer of these loans approved. And lastly: ""Only at the end of each month did I realize how much I've spent," Ms. Zhang said, adding she made many impulsive purchases on clothes and cosmetics because the credit was available to her. She said she has never been late with her repayments." Therein is the major problem, people purchasing non-essential items without care because the money is readily available. If only she had waited just a single month she could have saved money, even whilst purchasing the same items. Micro-loans could be mostly considered as a poor-people tax. A communist backed newspaper should know better.

AYBABTME 7y ago
Agreed, the whole article is scary. It seems to suggest that a whole new generation is being taught self-destructive financial behavior.
- asdff 7y ago
  Is it? People seem to be paying on time and aware of their spending habits as a result. I do wonder what the advantage is for using credit in China. In the U.S. it offers another layer of security, flexibility, builds credit, and earns rewards compared to using debit or cash, and is interest free as long as you pay on time.
  - bArray 7y ago
    > People seem to be paying on time and aware of their spending habits as a result. More than 1% aren't per month, every month - and the Chinese economy is currently relatively stable, imagine a 2008 happening to those people. Also remember that some people may be borrowing to pay off the previous short-term loan - or are at the very least stuck continuously having to borrow from their future selves just to keep things afloat, each pay check evaporating as soon as it comes in. There's going to be a lot of people now stuck in a dangerous loop of dependency on these short-term loans at the best. > I do wonder what the advantage is for using credit in China. I think the advantage is small when compared to disadvantage. The advantage is small - you could get a good friend to lend you $10 to see you through a particularly bad month. The advantage of a friend is that they'll also tell you when enough is enough, when it's ongoing, when they believe you're borrowing for the wrong reasons. > In the U.S. it offers another layer of security, This is just a band aid for a much worse problem - that the average person in the US is living pay-check to pay-check, without money saved. > flexibility This is literally the only good reason I can think of for it's existence, but it's almost impossible to filter for these people. > builds credit Again, this shouldn't need to be a thing. > earns rewards compared to using debit or cash, The fact that cards don't earn rewards is an oversight on their part. The bank I'm with has two accounts, one is "easy access" and one is "savings". I can transfer from one to the other very easily, but I can only pay out of the "easy access" directly. If I keep money in the "savings" account for a period of time, I am rewarded with high interest, i.e. I am rewarded for saving money. Other shops in the local area also have "loyalty" cards which also reward purchases of certain items (it helps them predict what stock they will need and to shift excess stock if required, as well as collect data about customer purchasing habits). > is interest free as long as you pay on time Smoking is harmless as long as you only ever do it once. The point is that people get trapped and reliant on these loans, at a cost.
  - powerapple 7y ago
    The reason it is being paid on time I assume is that many accounts are created for people never needed to borrow money, like my account. It was created automatically and my taobao purchases go through it if I don't choose to opt out(which I didn't do due to laziness). These rush to new gold mine in lending money to young people are very bad, Alibaba is probably a responsible player, but there are so many bad players now. I personally do worry about the future for young generations.
chvid 7y ago
I think the parallel is not exploitative pay day loans but the western credit card. China is not as developed as the west when it comes to trust and identity. This causes credit mostly to be given to a few well established and well connected identities. And leaves China with a high savings rate. Changing that will unlock further growth and spread of wealth.

by bArray 7y ago

AYBABTME 7y ago

Agreed, the whole article is scary. It seems to suggest that a whole new generation is being taught self-destructive financial behavior.

asdff 7y ago
Is it? People seem to be paying on time and aware of their spending habits as a result. I do wonder what the advantage is for using credit in China. In the U.S. it offers another layer of security, flexibility, builds credit, and earns rewards compared to using debit or cash, and is interest free as long as you pay on time.
- bArray 7y ago
  > People seem to be paying on time and aware of their spending habits as a result. More than 1% aren't per month, every month - and the Chinese economy is currently relatively stable, imagine a 2008 happening to those people. Also remember that some people may be borrowing to pay off the previous short-term loan - or are at the very least stuck continuously having to borrow from their future selves just to keep things afloat, each pay check evaporating as soon as it comes in. There's going to be a lot of people now stuck in a dangerous loop of dependency on these short-term loans at the best. > I do wonder what the advantage is for using credit in China. I think the advantage is small when compared to disadvantage. The advantage is small - you could get a good friend to lend you $10 to see you through a particularly bad month. The advantage of a friend is that they'll also tell you when enough is enough, when it's ongoing, when they believe you're borrowing for the wrong reasons. > In the U.S. it offers another layer of security, This is just a band aid for a much worse problem - that the average person in the US is living pay-check to pay-check, without money saved. > flexibility This is literally the only good reason I can think of for it's existence, but it's almost impossible to filter for these people. > builds credit Again, this shouldn't need to be a thing. > earns rewards compared to using debit or cash, The fact that cards don't earn rewards is an oversight on their part. The bank I'm with has two accounts, one is "easy access" and one is "savings". I can transfer from one to the other very easily, but I can only pay out of the "easy access" directly. If I keep money in the "savings" account for a period of time, I am rewarded with high interest, i.e. I am rewarded for saving money. Other shops in the local area also have "loyalty" cards which also reward purchases of certain items (it helps them predict what stock they will need and to shift excess stock if required, as well as collect data about customer purchasing habits). > is interest free as long as you pay on time Smoking is harmless as long as you only ever do it once. The point is that people get trapped and reliant on these loans, at a cost.
- powerapple 7y ago
  The reason it is being paid on time I assume is that many accounts are created for people never needed to borrow money, like my account. It was created automatically and my taobao purchases go through it if I don't choose to opt out(which I didn't do due to laziness). These rush to new gold mine in lending money to young people are very bad, Alibaba is probably a responsible player, but there are so many bad players now. I personally do worry about the future for young generations.

chvid 7y ago

I think the parallel is not exploitative pay day loans but the western credit card. China is not as developed as the west when it comes to trust and identity. This causes credit mostly to be given to a few well established and well connected identities. And leaves China with a high savings rate. Changing that will unlock further growth and spread of wealth.