Recently, on the Chinese social media platform Douban, there is a group called “Debtors Alliance”, where tens of thousands of young people gather regularly, most of them carrying huge debts due to credit card debts and online loans, and using loans to support their loans to move between various financial platforms. One study points out that nearly half of China’s young people are in debt.
The day before the double 11 shopping holiday, a group called “Debtors’ Alliance” on the Chinese social media platform Douban hit the top of the search. In this discussion group, about 30,000 users gathered here for various debt reasons. Many young people clocked in daily to pay off their debts, talking about their anxiety, remorse and numbness to overdue debt collection, and even sharing their experiences with each other on how to escape debt. Some members of the group posted about their own experiences of unemployment, overspending, and using loans to support loans, saying, “From petty cash to debt, I blame myself for sinking too low.”
According to the group’s voting statistics, most of these “debtors” are in the age group of twenty to thirty years old, and the average amount of debt is mainly concentrated in the range of 10,000 to 100,000 yuan, some of them even owe up to a million or more. The data shows that most young people borrow to meet the demand for overspending, and not a few of them are in huge debt due to gambling, fraud and investment losses.
Young people fall into the swamp of overspending by advocating consumerism
Qin Weiping, an independent economist, told the station that the employment situation has declined this year due to the New Crown (CCP virus) epidemic, hitting the young group, whose income is already unstable, hard. In addition, driven by continued price hikes and prevailing consumerism, young people have strong consumer demand and weak management of personal finances, and all these factors have made the debt group grow stronger and stronger.
“The employment situation of young people is not very good, they do not have a stable source of continuously growing income, but their consumer spending has been increasing. There are two reasons for the increase in spending: prices are rising in society as a whole, and various basic expenses are growing if young people survive in China’s large and medium-sized cities. But it is undeniable that young people are a group with strong consumer demand, and they are easily influenced by social culture, including the media.”
According to Qin Weiping, under the policy of stimulating consumption to boost the economy, the Chinese government has supported the development of small and medium-sized lending platforms, and these platforms have opened up channels for young people to borrow at will by lowering the threshold. In addition, the official propaganda of consumerism and hedonism has misled young people to overspend, leading to an imbalance in the proportion of indebted groups in society.
“Normally consumption has a great boost and pulling effect on the economy and should be encouraged. But over-consumption is a hidden trap, if only a very small number of people inside a society have the idea of over-consumption, it may be okay, but if most people are over-consuming, this is a big blow to the future of Chinese society, including the future of young people, and there will be great pressure on the whole future economic growth.”
According to the 2019 China Consumer Youth Debt Status Report, the overall penetration rate of credit products among young people is as high as 86.6%, and the actual number of people in debt accounts for 44.5% of the overall, with nearly half of young people living a debt life of “spending tomorrow’s money to enjoy the present”.
Online lenders are lax in approving and lending too much government financial supervision is lacking
Qin Weiping said that the young people are in personal financial trouble because the Chinese government lacks financial supervision of lending platforms: “This is related to the interests of the government, consumption is good for the short term growth of the economy, so the government turns a blind eye to it and does not play a regulatory role. The government’s financial regulation in this area is very weak, these financial lending institutions are inducing consumption, in a way financial fraud, with the nature of casino borrowing usury, but young people do not understand.”
In response to the chaos of overly lenient approval and excessive lending by some online lending platforms, in November this year, the China Banking and Insurance Regulatory Commission, together with the People’s Bank of China and other departments, drafted the Interim Measures for the Management of Online Small Loans Business (Draft for Comments). The Measures clearly require that microfinance companies should comprehensively adjust the loan amount and repayment period according to the borrower’s income level, overall debt, asset status and other factors. In response, Wang Jian, a senior financial media personality in the U.S., believes that the Measures can only strengthen the regulation of the financial activities of lending platforms, while the spontaneous behavior of overspending groups is not under its jurisdiction: “(The Measures) are a solution to the safety of the operation of online lending platforms. The regulator is regulating the platform not the lender, the lender is governed by the platform. And the network platform has no way to identify who is excessive lending who is having difficulties at home, it can not identify. This group of people can only buy a lesson, the world has no way to solve the problem of overconsumption.”
To solve the chaos of excessive debt needs to strengthen education
Wang Jian said excessive debt is a problem faced by the world, and does not have Chinese characteristics. He said the young group has no self-control and financial concept, and is easily misled by the social trend, thus overspending. Helping young people who are in debt to get out of their predicament can only be done through better publicity and education. In addition to the government, social institutions also have to take the responsibility to guide young people properly.
“The situation we have in China now is that society is not functioning well, and many things are not spoken about and not managed. There is no one to manage because the government can’t manage it, and the government won’t let others manage it if they can’t. China doesn’t have these NGOs to do this type of social work. It’s a process of social education.”
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