The whole notion of "credit" is a realtively new concept in China. Even today, most people in China don't have or use credit cards. This is not only true for individuals but for businesses as well. To really be able to extend credit to a person or a business, you need some way to judge creditworthiness. All consumers and businesses are not created equal. Some are more credit worthy than others. The only way to really evaluate "creditworthiness" is to have a credit history on people and businesses alike. If you don't have this, there is no way to determine who should be extended credit and who shouldn't. This is somewhat of a "chicken/egg" problem. The lack of the ability for banks in China to evaluate creditworthiness leads to lots of banks extending credit that never gets paid back. The banks end up having to write these off. What is happening in China is that some of the e-commerce sites such as Alibaba (B2B) and Taobao (the "eBay of China") have some of the most extensive credit databases in China. What we are seeing is that the banks want to work with these services to leverage the credit history/data they have on consumers/businesses as a way to better evaluate "creditworthiness." Credit cards are beginning to catch on more and more in China, which has traditionally been a "cash based" soceity. One concrete example of this is, when I was living in China I had to pay 4 months rent up front because there was no way for the real estate agent to determine if I'd be able to pay or not. The only way around this way to collect money in advance. The same way true for the gym I was a member of. Instead of paying month to month (as we do here in the US), I had to pay for the entire year upfront. This is great from a cash-flow perspective of the businesses but also a mechinism to insulate themselves from people not being able to pay every month. This is changing but it is a slow process. I
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