China’s Credit Score-driven Sharing Economy Expected to Breach 10T Yuan by 2020


China’s credit score-based sharing economy is expected to drive a trend of “leasing replacing buying” and roaring growth in the rental market for everything from homes and automobiles to computers and children’s toys.

The first “2019 New Rental Economy Report” (2019新租赁经济报告) released by the Shanghai Institute of Finance and Law (上海金融与法律研究院) (SIFL) sees China’s rental economy exceeding the 10 trillion yuan threshold by next year, and the number of participants surpassing 100 million.

The report highlights three main trends on the credit score-driven “deposit-free rental market” since last year, chief amongst them a surge in the number of users in third and fourth-tier cities, who now account for nearly 30% of the whole.

Younger Chinese account for the preponderance of China’s new rental market, with those born in the 1980’s and 1990’s accounting for over 90% of the total.

The report also points to an increasing diversification in the range of goods being leased by users in23018, including clothing, jewellery and books.

Fu Yifu (付一夫), a senior researcher with Suning Finance, said to Financial News that the “use of credit scores to replace deposits” is what distinguishes the new rental economy from the traditional rental economy, helping to reduce the entry thresholds and capital risk for leasing by users.

Under this system Chinese users do not need to make a monetary deposit for the use of a rented item, as permission is instead allocated based on their personal credit scores.

While breach of terms under a traditional lease would lead to deduction or confiscation of the deposit, under China’s new system such breaches can instead result in a penalisation of the lessee’s personal credit score, which can have far broader implications than mere loss of money.

“Despite passing through many twists and turns over the past several years, we remain highly optimistic about the prospects for the rental economy,” said Fu Weigang (傅蔚冈), executive head of SIFL.

“Credit replacing deposits resolves the main headaches for the rental market, as well as avoids risk in relation to the abuse of leases.

“This year the sharing economy will enter the second half, and the new leasing economy of credit replacing deposits will become the industry trend, thus reducing the usage threshold and funds risk for consumers.”