Chinese bankers face a dilemma. Most banking in China has traditionally depended heavily on corporate clients. Given China’s transition to a slower, more sustainable, growth rate, fluctuating currency rates and uncertainty about the direction of the global economy, future expansion depends on identifying a new source of clients.
An obvious choice is to develop the country’s largely untapped retail market by making credit available to private individuals. The challenge is that accurately judging risk depends on reliable credit histories and of China’s 1.4 billion population, only an estimated 200 million people have ever owned a credit card or engaged in the kind of financial transactions needed to develop reliable credit history. While a growing number of regional banks have shown interest in exploring the potential for community banking, few have found a business model that will best fit China’s contemporary reality. However, something new is establishing itself.
