The musical mood of consumer finance in China has been ‘rapid and joyful’ during 2015-17 represented by the strong growth, the considerable profitability and the recognition from capital market of leading players. However, during the past twelve months changes in the regulatory environment has put question marks on the sustainability of such growth and profitability. These regulatory headwinds are now joined by the legitimized concerns of whether and when a consumer credit crisis – which never happened in China before – will happen.
We see China consumer finance not as a single market, but a collection of different sub-markets with different borrowers/lenders, business models and risk attributes. By using this segmented approach, while we hear the music is becoming ‘slow and painful’ in some segments, it is still playing at a healthy pace in other segments. What is more important is that the overall tune of the music is changing, from free-style country music to more sophisticated and harmonized symphony that requires rules and instruments.
In this report, we aim to answer the following questions:
- How fast will consumer finance continue to grow in China and how big the market will be in the next 5 years?
- How will the consumer behaviour, regulatory headwinds and technology developments reshape this market?
- Will there be a consumer credit crisis in China?
- What are the implications to different types of players (i.e. banks, non-banks participants, and investors)?