(Photo/Chinanews.com)

With China’s post-80s and post-90s generations becoming the main driving force of consumption, deficit spending is no longer a rarity. This has led to an increasingly common phenomenon among the country's young people - even though they work hard, they are always poor, China Youth Daily reported on Feb. 22.

By October 2018, China’s consumer finance market had reached a considerable 8.45 trillion yuan, according to a report released by the Institute for China’s Economic Practice and Thinking at Tsinghua University, on China’s consumer credit services in 2018.

The increased desire for consumption has boosted the development of various credit loan platforms and products, such as Ant Check Later, a loan and installment service launched by Chinese e-commerce giant Alibaba Group, and Baitiao, a credit loan product of China’s e-commerce behemoth JD.com.

These popular credit loan platforms provide people with short-term credit loans with different repayment options. These credit loan products have won popularity among China's younger generations over recent years. This age group use loans to buy daily necessities, clothes, electronics, and to pay rent.

Liu Xiaocheng, a professor at the School of Journalism and Communication of Lanzhou University and a consumer culture scholar, explained that due to multiple factors, including the consumer culture of some Western countries as well as the industrial restructuring and economic development in China, more young people now adhere to the consumption concept “buy now, pay later”.

Yao Wei, a white-collar worker in south China’s Guangzhou, has three dates circled on her calendar. Firstly, a loan of 3,000 yuan (about $446.68) from Ant Check Later due on the 9th of every month. Secondly, rent of 2,500 yuan to be paid on the 17th of every month, and thirdly, a loan of 1,500 yuan from Baitiao due on the 30th.

Although her fixed debts every month amount to 7,000 yuan, Yao recently used a credit card to buy her boyfriend a 2,000 yuan game console.

Deficit consumption has become a part of Yao's life. She often uses the following month's salary before she has even received it. She explained, “Being happy matters the most. I can buy first and pay later, thanks to the range of credit loan platforms now available.”

Yao has paid the price for this lifestyle. After working for three years, she not only has no savings, but also has growing debts.

Yao is not the only one. Zhao Xin, a young man who works in the gaming industry, is also a regular user of credit loan platforms.

According to his annual spending report provided by Alipay, Alibaba’s third-party online payment service platform, Zhao spent 80,000 yuan via Alipay in 2018, more than 96 percent of his peers.

He ordered take-out food 218 times online, spending over 20,000 yuan, while his expenses on transportation, cultural products, education, and entertainment totaled more than 30,000 yuan.

“This had not included other expenses I paid offline,” said Zhao, who understands that his monthly income of 8,000 yuan cannot continue to support such an extravagant lifestyle.

“Over 90 percent of these expenses were paid with Ant Check Later,” said Zhao, disclosing that he started to use the service in his sophomore year.

Zhang Shuo, a junior at college, often regrets her deficit spending habit. During last year’s Double Eleven Global Shopping Festival, Zhang spent her budget for two months in just one night. On another occasion, she bought several lipsticks in one go, because a makeup blogger had said they were beautiful.

While most people use credit loans to buy what they want and enjoy life, some stay calm and prefer to use these services for emergencies, to invest or to purchase financial products.

Li Tian, a young woman who works in a Beijing-based media company, used credit loan platforms to pay her rent, buy daily necessities, and pay the bills at the beginning of her career when she only received a low internship salary.

Credit loan platforms saved her from the embarrassment of borrowing money from friends and family, Li said, adding that she lowered her credit lines as soon as she got promoted, so she didn't end up spending unnecessarily.

Zhang Xinyue, a young woman from east China’s Zhejiang Province, has raised her credit lines on credit loan platforms several times so that she can borrow more money for her daily life, while using her income to buy financial products, which helped her save 60,000 yuan during the three years of her postgraduate program.

There are 170 million post-90s in China, of which 45 million have started to use Ant Check Later, with nearly 40 percent of post-90s users setting Ant Check Later as their preferred means of payment, according to a report released by Alipay in 2017 on the consumption of young people in China.

While young people continuously break the record of consumption for better looks and happier lives, their contractual capacity is sliding.

According to Alipay’s report, in 2017, 99 percent of China’s post-90s generation could repay their loans on time, while the annual report on debt repayments on China’s popular social network app, WeChat, released in January by Tencent, revealed that only 61 percent of users today repay their debts on time.

Borrowing from credit loan providers without any way of keeping up with repayments can be risky. For example, Wang Qi, an ambitious young man who intended to start his own business with the help of credit cards, is now caught in a deficit spending trap. He even became suicidal when he faced overdue bills from seven separate credit cards.

There is an opportunity to take advantage of credit cards by borrowing from one to pay off another, but only about 10 percent of people can benefit from such venture investments, said someone working in financial intermediaries for the last three years.

Industry insiders explained that while deficit spending has brought convenience to young people in China, there are certain risks in these new consumption behaviors that need more attention as the country transforms from a production-based society to consumption-oriented society.

Ye Zhusheng, a law teacher at the South China University of Technology and a practicing lawyer, compared online credit loan platforms to “economic opium” that entice young people to get into the habit of deficit spending.

“It hasn’t been explicitly prohibited by law, but encouraging young people to take out loans which they are unable to pay back goes against business ethics,” said Ye, who also warned young people to take responsibility and base expenditures upon their income.

Young people are in a relatively unstable stage of life, and may form irrational and unhealthy consumption concepts if companies keep digging into the human desire to consume, said Liu.

Deficit and excessive spending could cause young people to fall into debt traps, thus damaging personal reputation, family relationships, and studies, he noted.

Liu suggested that society should create more conditions to facilitate the consumption upgrading of young people, and help them understand the boundaries of deficit spending as well as the consequences of excessive consumption, so that they can find a rational balance between products needed for survival, personal development, and reasonable enjoyment.