Media reports that in China, millions of local consumers are faced with the problem of blocking access to mobile payment apps.
According to information held by journalists in the specified country, more than 8.5 million people cannot use the mentioned digital products because they were blacklisted due to non-compliance with the deadlines for making payments on mortgages and business loans. This problem was faced by consumers from China, mainly between the ages of 18 and 59. Blocking access to digital products that allow users to make payment transactions was recorded against the background of record defaults. The media reported this information, referring to the protocols of the Chinese courts.
At the beginning of 2020, the number of citizens in the said country who defaulted on mortgage payments and business loans amounted to 5.7 million people. Since then, this figure has increased significantly due to the downturn in the Chinese economy caused by the coronavirus pandemic and several other internal problems.
The media reports that the current legislative framework in force in China provides for a ban on participation in several financial transactions concerning citizens included in the mentioned blacklist. In this case, the restrictive practice extends to the ability to buy air tickets and use mobile apps, including WeChat Pay and Alipay. A Chinese resident is blacklisted after lenders sue the borrower and this person misses a subsequent payment.
Dan Wang, chief economist at Hang Seng Bank in the mentioned country, says that the increase in the number of citizens who are overdue to make payments on loans is the result of cyclical and structural problems. According to expert, this situation may worsen.
Currently, Alipay and WeChat Pay account for 91% of China’s digital payment space. The annual volume of non-cash payments in this country is 434 trillion dollars.
Against the background of the growing number of defaults, Chinese legal experts talk about the need to introduce personal bankruptcy laws that will ease the debt burden in case of individual insolvency. Liu Junhai, a law professor at Renmin University who was involved in drafting China’s corporate bankruptcy law, said it was necessary to find a way to help those who have overdue payments improve their situation.
The lack of transparency regarding personal finances complicates the implementation of the mentioned initiatives. Policymakers have been able to make little progress in implementing rules on the disclosure of information about individual assets due to the negative reaction of government officials and other groups who fear the detection of corruption as a result of the new legal algorithms.
The personal debt crisis in China was recorded after massive borrowing by local consumers. Household debt as a percentage of the country’s gross domestic product has almost doubled over the past decade, reaching 64% in September. The relevant data were released by the National Institute of Finance and Development, which is an analytical center based in Beijing.
In China, there is currently a decrease in the level of manageability of growing financial obligations because the increase in wages slowed down or became negative during the economic crisis. The unemployment situation is also deteriorating in the country. In July, 21.3% of local youth were not employed. This figure has become a record and, according to some media, has prompted Beijing to stop publishing relevant data.
China Merchants Bank reported that in 2022, the number of 90-day overdue credit card loans increased by 26% compared to the previous year. Consulting company China Index Academy has released information that in the first nine months of 2023, 584,000 foreclosures were recorded in the Asian country. This indicator increased by almost a third year-on-year.
Experts say that the growth of consumer demand for contactless payment transactions may become one of the main trends in the global financial operations industry of the corresponding functional purpose this year. Also, this trend may form something like a path to innovative solutions that will determine the content of sphere commerce in the coming years.
Brian Scott, Director of Development at PSCU, during a conversation with media representatives in the fall of 2023, said that the basis for the development of contactless payments was created several years ago when credit unions and other financial institutions began to develop and issue cards designed for making relevant transactions on a massive scale and educate the public about their use. The coronavirus pandemic has become a kind of decisive factor in the transformation of consumer preferences in the sphere of financial services. Against the background of a difficult sanitary and epidemiological situation, many consumers began to explore new payment methods, fearing the risks associated with a dangerous so-called virus reality.
Brian Scott talks about the incredible impact of contactless payments, commenting on the current situation in the sphere of financial services.
In October, the media reported that retailers that target Chinese consumers who are inclined to save money recorded a sales boom. This trend was observed against the background of the economic downturn in the country. For example, an online retailer, the revenue of the online retailer Pinduoduo has increased by 66% since the beginning of autumn. The platform of this brand offers customers the opportunity to purchase clothing, electronics, food, and other goods at lower prices than other sellers who do business in the digital space.
As we have reported earlier, McKinsey Says About Absence of Signs of Recovery in Consumer Activity in China.