China’s Worry of Substandard Loans

The United States became a victim of a substandard loan crisis over one decade ago. The amount of moral hazard and adverse selection in the mortgage industry were alarming. However, many individuals chose to profit off this calamity and were able to escape prison in the process. Signs of this behavior are beginning to creep back into reports, and the economic alarmists remain silent. With that said, other nations have a different approach to substandard loans and many would consider it to be overbearing. At this time, specific Chinese lenders are using risqué photos of young adults as collateral for substandard loans. Now, one has to question how far this slippery slope will go.

Determining the Fall-Out

If you are not aware, China is currently working on a social credit system which is reminiscent of dystopian tales told by Aldous Huxley or George Orwell. It is already difficult enough to receive a line of credit in this nation, and specific Chinese lenders are using this as leverage in the lending space. Many of these institutions are unlicensed, so one has to question how they can serve so many loans without shutting down. Observing the social climate of China at this time is very interesting, and one has to wonder if certain aspects will make it stateside.

Finding the Root of the Problem

Those who belong to the millennial generation are the prey of these types of practices. Given the short-end of the stick in terms of financing even simple items, they turn to shoddy lenders to make ends meet. Once these types of things begin occurring anywhere in society, it is time to think of solutions as opposed to perpetuating the status quo. Many issues are plaguing this world at the moment, and legislators must come together to help provide solutions for the entire world.

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