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December 12, 2018

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Consumer credit binge still racing along

Driven by the increased availability of third-party platforms, online financial services in China have seen rapid growth amid tightened regulations, according to a report by Moody’s Investors Service.

Total outstanding consumer credit in China totaled 36 trillion yuan (US$5.2 trillion) as of the first half of 2018, with mortgages accounting for 67 percent, credit cards 17 percent and third-party platforms a combined 15 percent, the report cited economic data provider CEIC saying.

Excluding mortgages, total outstanding consumer credit was 12 trillion yuan as of end-June, maintaining annual growth of 28 percent since 2015, the report said.

The growth reflects increased personal income and consumer spending and also the strong desire to generate returns above cash-deposit rates.

In China, there are two main types of third-party platform: partnerships between financial institutions and technology companies and peer-to-peer platforms through which individuals, rather than financial institutions, make loans.

Thanks to these fintech firms, consumers and small companies now have easier access to loans and different types of investment, thereby helping support the country’s economic development.

For example, the number of consumers investing in wealth management products online jumped 66 percent to 169 million yuan by the end of the first half, from the same period two years ago, according to the China Internet Network Information Center.

But the sector, especially P2P platforms, has relatively high default rates and a number of operations have failed. Data from Wangdaizhijia, a web portal that tracks the industry, shows the number of P2P platforms has dropped dramatically. In response to the fragility of this unregulated industry, watchdogs have tightened supervision since the second half of 2016.


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