China’s Consumer Credit Balance Expected to Exceed 10T Yuan by 2020

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Domestic analysts expect the Chinese consumer credit market to see robust growth in the near future as household expenditures and leverage continue to increase and Beijing drives an increase in domestic consumption.

The “2018 Consumer Credit Market Research Report” (2018中国消费信贷市场研究) released by Tsinghua University on 18 January indicates that consumer credit in China hit 8.45 trillion yuan in October 2018, leaving ample room for further growth in the market.

According to Economic Information Daily multiple analysts expect China’s consumer credit balance to breach the 10 trillion yuan threshold by 2020.

Changjiang Securities sees household consumption expenditures reaching 43 trillion yuan in 2020, with each percentage point increase in the household debt-consumption ratio translating into a market of several hundred billion yuan.

Data from the People’s Bank of China indicates that new renminbi lending was 16.17 trillion yuan for full year 2018, for a YoY increase of 2.64 trillion yuan.

New short-term loans to households hit 2.41 trillion yuan, for arise of 31% compared to the figure of 1.83 trillion yuan in 2017, while in December of last year short-term household loans rose to a ten year high for that month.

Li Daokui (李稻葵) , Director of Tsinghua University’s Center for China in the World Economy, said that as the contribution made by consumption to the Chinese economy rises consumer credit will see its share of total credit increase, while medium and long-term loans for homes and automobiles will decline as a share of consumer loans.

Consumer finance companies will be able to use their own unique advantages to vigorously pursue overlapping development with commercial banks, gaining access to an immense “blue ocean” market.

Consumer finance companies saw rapid growth in 2018, with the number of approved vehicles rising from 4 in 2009 to 23 last year, and at least 11 consumer finance companies plan or pushing through with capital increases.

China’s internet giants also made bold moves in the consumer finance space as part of their broader fintech ambitions, with Baidu spinning off Duxiaoman Financial, and Tencent’s online lender WeBank extending nearly 200 billion yuan in credit via its signature “Particle Loans” (微粒贷) and “Micro Vehicle Loans,” (微车贷).

Ant Financial alone accounted for 53.35% of consumer finance ABS issuance in 2018, via Ant Check Later (蚂蚁花呗), which saw the issuance of 104.2 billion yuan, and Queqianme (蚂蚁借呗), which saw the issuance of 47.55 billion yuan.

Lexin’s report for the third quarter of 2018 indicates that the number of customers it had serviced had reached 32.6 million, for YoY growth of 61%, and that loan balance was 25.8 billion yuan, for YoY growth of 62.1%.


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