- Many post-90s face credit problems due to private credit products in China.
- The younger generation have a much lower savings rate.
- The Chinese government may regulate more strictly the private credit market.
On December 4, Beijing Daily, the official newspaper of the Chinese Communist Party Beijing Municipal Committee, posted on Weibo an article titled “The Young Generation that Got Stuck in Huabei.” According to a study, there are 175 million people born between 1990 and 1999 in China, the so-called “post-90s.” Only 13.4% of them claim that they avoid any debt, while 86.6% have tried credit products, the most popular ones being Huabei and Jiebei, two credit services offered by Ant Group.
Unlike traditional credit cards, products like Huabei and Jiebei have very few requirements for new users. Their slogan is “one-click activation, consume first and pay back later.” The initial credits can be anywhere from $80 to $8,000, depending on the profile of the applicant. For younger people, especially the students, these products become much more attractive and reachable than traditional banking credit cards.
Although they are easy to contract, these credit products are actually related to people’s personal credit report. If they fail to pay back in time, they will have serious credit issues. However, these risks are usually explained in small letters in a very long user agreement, which most people don’t read. Being young and impulsive, the post-90s can easily fall into the trap.
The Chinese community has a tradition of saving. China has one of the highest gross national savings in the world. In 2019, the average saving per capita in China was almost $10,000, which is enough for most people to live on for two years without any extra income. Experts say this tradition has greatly helped China through the Covid pandemic.
However, the younger generations, especially from the post-90s on, are less keen on saving. During the Bund Summit 2020 in Shanghai, Zhou Xiaochuan, the former President of the People’s Bank of China, warned that younger people in China are showing an obvious drop in their savings rate. He expressed his deep worries about their overconsumption. As the frugal generations get older and older, if another crisis comes, how can the extravagant younger generation overcome it when they have no money left in the bank?
Regarding this article, internet users share varied opinions. Some are indifferent about the topic because they only use Huabei once in a while and pay back on time. Some blame the newspaper for hiding the real problem: the huge pressure of mortgages, healthcare and education. While some contribute the problem to capitalism for promoting the wrong value of consumption.
It’s worth mentioning that just a month ago, the Chinese government halted the IPO of Jack Ma’s Ant Group. Rumors upon its future never stopped. More and more analysts now believe that it won’t get approved any time soon. Seeing this article on credit getting published in a state-run newspaper, they might be on to something.