Lending in China is a risky proposition. When a U.S. bank needs to decide whether to approve a loan to a U.S. customer, it simply accesses the customer’s credit report, which is often the deciding factor. The bank can thus reasonably manage its credit risks based on the historic default rates for the lending categories it specializes in.
In China, however, about 80 percent of potential borrowers have no credit record. That has left lenders with two approaches to credit risk: concentrate on lending to the highly sought-after 20 percent of borrowers with credit records and live with less profitable … Read more