[Correspondent Diary] Chinese University Students Face Debt Restrictions as Chinese IT Platforms Get Crackdown

Joint Action by 5 Chinese Ministries to Curb Small Loans for University Students... Debt Risk Warning
Ant Group, JD.com, Baidu, Meituan Hit Hard by Tightened Small Loan Regulations

[Asia Economy Beijing=Special Correspondent Jo Young-shin] Chinese authorities have cracked down on internet and mobile microloans for university students.

The regulation on microloans for university students involved major departments such as the China Banking and Insurance Regulatory Commission, the People's Bank of China, the Cyberspace Administration of China, the Ministry of Education, and the Ministry of Public Security, suggesting that student debt is becoming a social issue.

According to Chinese media including the People's Daily and Xinhua News Agency, five Chinese departments jointly issued the "Notice on Additional Regulations for the Supervision and Administration of University Students' Internet Microloans."

[Image source=Yonhap News]

Chinese media reported that these measures were taken to protect the legitimate rights and interests of university students and to promote the healthy development of campus financial services.

As a result, Chinese university students are expected to find it difficult to easily access microloan services on Chinese internet and mobile platforms such as Ant Group, JD.com, Baidu, and Meituan.

To obtain a loan, students must go through stringent procedures including identity verification, confirmation of loan usage, assessment of credit and financial status, and guarantees from parents or guardians.

Chinese media expressed concern that among the 40 million university students in China, some have fallen into financial difficulties after being tempted by offers such as interest-free installments.

Xinhua News Agency reported that some university students who were lured by large financial platforms and illegal operators have fallen into the debt trap, emphasizing the need for strict management of risks related to university students' internet and mobile loans, standardization of debt collection, strengthening of personal information protection, and enhancement of financial education. Xinhua also pointed out that students mainly use borrowed money for unnecessary consumption such as travel, digital products, and clothing, and that they lack sufficient awareness of loan risks, are easily tempted, and have insufficient ability to repay loans.

The People's Daily noted that in recent years, university students have been taking out loans under various names such as "low-interest loans," "general loans," and "cosmetic surgery loans," and criticized that easy access to loans has led students into a debt trap.

Chinese media did not mention specific cases such as how high the delinquency rate of university students' microloans is or what illegal issues occurred during the debt collection process.

Meanwhile, some analysts suggest that Alibaba's financial subsidiary Ant Group could be the biggest loser from the Chinese government's crackdown on university students' microloans. Ant Group operates microloan services called "Huabei" and "Jiebei." It is reported that last year, 10% of personal loans in China were made through Ant Group.

Chinese economic media Caixin evaluated that this regulation on university students' microloans will once again deliver a shock to Chinese online and mobile platform companies such as Ant Group.