US President Donald Trump’s call for American credit card interest rates to be capped at 10 per cent for a year has sparked a debate in China about whether Beijing should impose a similar limit on online loans.
The discussion comes as many in China – especially younger people – are being enticed by credit offers amid a weak job market and a boom in online loan services.
“Apps now keep luring young people into borrowing,” a finance blogger with nearly 500,000 followers wrote in a social media post on Wednesday, adding the interest rates on such loans sometimes exceeded 10 per cent and could compound to around 24 per cent a year.
Citing Trump, the blogger urged Beijing to take action to rein in online lending rates.
But some commentators on social media said the idea might not translate well to China, where consumers were increasingly reluctant to spend and fewer people were willing to take on new borrowing to fund consumption.
The debate reflects growing public concern in recent years over China’s booming online lending market, with the government having moved to tighten oversight of online credit. It introduced rules in October that require lenders to clearly disclose the full cost of a loan and keep it within limits imposed by binding guidance from the Supreme People’s Court under which courts typically do not uphold lending costs above around 24 per cent a year.
Even if delinquency rises, it is unlikely to hurt financial stabilityXu Tianchen, Economist Intelligence Unit