China’s biggest internet platforms are edging their way back into consumer lending, after years of caution and silence that followed a sweeping clampdown, but it is not a loud return.
There are no bold public campaigns, no flashy industry speeches, however inside the sector, senior managers feel the mood has changed, and they are testing how far the door is now open. The trigger was subtle, but clear enough, Beijing announced interest subsidies for consumer loans this year, and in doing so placed Ant Group and WeBank alongside traditional lenders.
Regulatory landscape eases as China seeks growth
An industry source says the regulatory environment in the country “has become more accommodative.” “With the current economic situation being challenging, the economy needs to rely on large internet finance platforms,” said a source cited by Reuters.
That quiet endorsement carried weight and the platforms read it as a sign that the government wants consumption to lift again, and wants credit channels to work, so long as those channels are more contained than the wild era of the late 2010s. China is currently targeting a $23.9 trillion economy by 2030 to spur spending as previously reported by Cryptopolitan.
For three years, the sector lived in the shadow of the shock suspension of Ant’s blockbuster IPO. That single event told the industry that the age of free expansion was gone. Ant and others were forced to move financial services into separate companies and accept tougher capital rules.
Even after regulators said last year that major restructuring was complete, internet financiers were still tense, mindful that a mis-step would be punished.
What is now emerging is a cautious form of confidence, the state does not openly say go and lend again, but the space to lend is returning. One person close to a major platform said the environment feels more normalized compared to recent years. High-level meetings with private business leaders, and the suggestion that the worst of the regulatory storm has passed have reinforced that sense.
Forecasts reflect that sentiment as UBS expects lending on online platforms to pick up next year and keep climbing steadily through the decade. Profit growth in the broader consumer-lending industry is also expected to accelerate.
“It’s good timing,” said Zennon Kapron, director at fintech consultancy GL Insights.
“If the overall economy is struggling, then you need fintech because that drives consumption by making people feel more comfortable spending if they can pay in installments.”
Kapron.
Fintech advisers describe this as the product of a political and economic moment, weak consumption, soft household confidence, and a leadership that knows credit is one of the few levers that can nudge spending.
However, if there is new room to grow, there is also new risk, as household incomes have not recovered at the same pace as the return of loan officers. A Shanghai resident, who took her first online loan to furnish her home, said approvals were so easy that she decided to give it a try. Cases like hers explain why platforms see pent-up demand but cases at the other end of the spectrum explain why regulators may remain tense.
In the first quarter of this year, distressed consumer loans surged, with banks and finance firms offloading tens of billions of yuan of bad debt. Research houses estimate that a noticeable share of adults have either defaulted or fallen behind on repayments.
In a few extreme cases, borrowers used small loans to speculate on gold or currencies, only to watch their bets collapse and their debts spiral.
Insiders say Beijing still wants restraint and does not want embarrassment and if defaults spike again, the clampdown could return without warning. For now, internet platforms will keep probing the limits and they finally have air to breathe again, but they are still listening closely for every change in the wind.
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