Striking the right balance

Consumption upgrade

According to Beijing-based iResearch Consulting Group, the size of China's online consumer finance market surged from 6 billion to 437 billion yuan over 2013-16.

Credit loan products that offer deferred interest-free payments for a certain period of time have been attracting more young consumers to the shopping frenzy, which in turn has contributed to the nation's consumption upgrade.

From 2015 to 2016, credit loan product sales surged by an average of 41 percent per client after a number of retailers adopted Huabei, Zou Liang, vice-president of the Alipay Business Unit at Ant Financial says.

The company has also been offering incentives such as raising temporary credit limits for most of its users to encourage more spending during shopping festivals.

JD's Baitiao, which offers loans of up to 15,000 yuan has witnessed a surge in customers. The number of people who used Baitiao during the 2015 Singles Day online shopping event increased by 800 percent compared to the previous year.

In the past two years, Huabei and Baitiao have been the main credit loan products for Lu Kefei to upgrade his lifestyle. He spends most of the money on entertainment, healthcare and technology products rather than using the loan to purchase daily necessities.

During China's Singles Day sales in 2017, Lu's regular credit was raised from 25,000 yuan to 50,000 yuan. He spent 9,800 yuan on a nasal ventilator and the latest GoPro camera.

He found deals that allowed him to pay for his GoPro and ventilator over a year without charging interest. These incentives allow him to pay off the bill by spending just a few hundred yuan every month.

He uses the camera to capture his travels and diving trips, while the purchase of the ventilator was prompted by Lu's concern about the quality of his sleep. He has been using other kinds of products such as a fitness band to monitor his sleep patterns as well.

"Unlike our parents' generation who spent most of their income on daily necessities, we are more likely to buy things to improve the quality of our lives," says Lu. "The credit loan service has significantly improved my living standards."

Lu also says since technology products are upgraded almost every year, he would have no option but to rent these devices if he didn't have access to pay-by-credit services.

At the same time, business owners also find that credit loan products help them boost sales.

In August, US luxury brand Michael Kors entered into a partnership with Huabei to allow customers to book preorders and make purchases at its online boutique using Huabei's installment plan.

From Aug 15 to 18, the fashion house offered consumers the option to reserve via Huabei its new range of Selma handbags inspired by global skylines like New York. As a result, 150 bags were sold within the first 300 seconds of the promotional event, according to Vogue China.

Zeng says internet loan and installment services fit in with the trends of mass consumption in China and are in line with the growing demand for diversified financial products. Such services are adding to economic growth.

On the other hand, consumers should also be aware of its drawbacks. For some individuals, these kinds of services can also fuel excessive borrowing due to irrational consumption, he adds.

Contact the writer at zhangzefeng@chinadaily.com.cn