Generation Z happy to borrow to spend

China’s young people are the driving force behind the growth of the installment consumption market, spending more rationally than you might have expected, according to a recent survey.

The survey by Southern Metropolis Daily covered 2,319 respondents with input from installment e-commerce platform Fenqile.

China’s short-term consumer loan balance hit 8.8 trillion yuan (US$1.3 trillion) last year, 70 times more than the amount 14 years ago, according to the People’s Bank of China, the central bank.

And the 150 million Generation Z — those born in 1995 and after — are the main borrowers.

Over half of respondents aged between 22 and 25 said they would use installment services, with those aged between 26 and 29 only slightly more reluctant to get into short-term debt.

The study suggests this is due to the mismatch between income and consumption needs among the younger group, a group which made up more than half of sales on Fenqile during the Singles Day shopping festival, for the past three years.

People from third- and fourth-tier cities, with both wages and living expenses lower than their peers in big cities, were more likely to use installment services, which also have a higher popularity among more educated consumers.

As for the reasons for choosing installment payments, “enhancing my quality of life” came top.

Somewhat counter-intuitively, spending among Generation Z was found to be rather rational. Seven out of ten claimed that their debt-to-income ratio stood below 30 percent.  Around four fifths of respondents said the would keep their annual loans below 20,000 yuan, while less than 8 percent said they would borrow more than 50,000 yuan a year.

The survey also found that most installment consumers were highly creditworthy and valued maintaining a good credit profile.

Two-thirds of the respondents said their life satisfaction had improved either slightly or significantly after using installment services, which reduced their financial pressure and helped to solve the mismatch between their current income and consumption needs.