According to Shanghai Daily, consumer debt is rolling out to middle and low-income earners in China and in my opinion this will just leave innocent people slaughtered by easy credit.
Imagine living in a country where easy credit has never been available and then having your first taste of it. It will be like doing meth for the first time and being an instant addict. The thrill of easy credit actually has some of the same brain chemistry responses, just without the acne and bad teeth.
“Private capital, foreign and domestic banks and Internet companies will be allowed to set up “consumer credit†firms, which can extend small loans to the public for their retail purchases, the State Council, China’s cabinet, said on Wednesday.â€
I wonder how Bank of America China is going to go over. Hopefully Capital One doesn’t translate into something bad you do with a duck and a goose. According to Google, 第一资本 actually translates back into English as First Capital. Oops.
Forecasters say the Chinese appetite for consumer credit will grow 20 percent per year.
“Compared to traditional loans offered by banks, loans designed specifically to fund retail purchases are generally small and without the need of guarantees. Such loans are especially handy for people who are either denied of credit cards by banks or whose cards have low credit lines,†said Wang Qisheng, chairman of Suning’s consumer credit arm.
And why do you think they were denied credit? I’m going to go with excessive risk of default.
As a consumer debt expert I can see what the byproduct of this kind of type of rampant credit access is going to be. It’s interesting that there appears to be little to no emphasis in passing out useless financial literacy classes before the meth gets loaded up for distribution. But then again I do have to give props to China for having teens who scored at the top of the charts on the Organization for Economic Cooperation and Development’s financial literacy test. Damn overachievers. American teens ranked ninth.
