Just spend

ON NOVEMBER 11th, Alibaba, a Chinese e-commerce giant, posted nearly $18bn in sales for the day. This broke last year’s record for Singles’ Day, an anti-Valentine’s Day that has become a love affair with spending. The popularity of the company’s virtual credit-card, Huabei (roughly translating as “Just spend”), may have helped. Consumers who spend less than 1,000 yuan ($146) online a month spend 50% more once they get one, according to Ant Financial Services, an Alibaba affiliate. To older generations, taught to save, borrowing is shameful. But financial habits are changing: Chinese consumers are being encouraged to develop credit histories.

Last year, the government awarded eight companies consumer credit-rating licences. Their pilot programmes are an attempt to flesh out thin financial records and get people thinking about their credit scores. This is new for most Chinese, who do not use credit cards and have never had credit scores. As of 2014, the People’s Bank of China maintained credit histories for around 350m citizens—less than one-third of the adult population. In America 89% of adults have credit scores. Without a credit history, consumers struggle to obtain loans. They tend to save rather than borrow or spend, stifling consumption.

Many now want to prove their creditworthiness, with an eye to the spending possibilities it opens up. The most popular rating firms are Sesame Credit, run by Alibaba, and China Rapid Finance, which is in partnership with Tencent, a social-media and online-gaming firm. Alibaba sees over 400m active users a month and Tencent 800m. They also offer the rating firms a treasure trove of consumer data.

Sesame Credit relies on users’ online-shopping habits to calculate their credit scores. Li Yingyun, a director, told Caixin, a magazine, that someone playing video games for ten hours a day might be rated a bad risk; a frequent buyer of nappies would be thought more responsible. Meanwhile, China Rapid Finance scours its users’ social networks. Thanks to its link with Tencent, which owns WeChat, one of the country’s leading messaging platform, it is able to examine data about their contacts and payments to judge creditworthiness. These are unorthodox methods by many standards. In 2014 Facebook began toying with using social media to gauge users’ credit. But it called the plan off in February 2016, citing regulatory concerns. Critics thought it creepy.

Chinese consumers, however, don’t seem to mind the privacy invasion. Since it launched in January 2015, Sesame Credit has amassed 190m users. This may owe something to the perks bestowed on holders of high credit scores: express service at hotels; deposit-waivers on car rentals; even accelerated visas to Singapore. Their scores also rise if they use Alibaba’s payment service, Alipay, and if their friends sign up for credit scores. So the rating system is in part a loyalty-rewards programme. Having a credit score and showing it off to one’s friends is now something of a status marker for the affluent young. Sesame Credit has teamed up with Baihe, China’s largest dating service, to encourage users to flaunt their credit scores on their dating profiles. Ever more are doing so—and playing a mobile game, designed by Sesame, in which users guess how their score compares with their friends’.

The pressure to announce one’s credit score is a response to the deficit of trust in the Chinese marketplace. Emerging from a planned economy, Chinese consumers have found themselves on unfamiliar ground, says Rogier Creemers, a China scholar at the University of Oxford. It takes time to build up a working economy of trust backed by verification systems, so they have tended to rely on face-to-face, cash transactions to protect against fraud.

As more people sign up to be rated, the industry may help fuel consumption. Credit-card penetration is expected to grow from 16% in 2014 to 44% in 2025, according to the Demand Institute, a think-tank. But the government has reason to be cautious. China’s household debt as a proportion of GDP has more than doubled over the past decade, reaching 40.7%. Sheldon Garon, author of “Beyond Our Means”, a book on spending versus saving cultures, says China is still experimenting with consumer credit. Having noted the disastrous effects of America’s borrowing binge, its leaders are wary of bubbles and their social consequences. For the Communist Party, one goal is economic growth; but another is social stability.