My biggest concern (aside from the lack of securities law, fair credit laws, or LAWS in general) is that there is ZERO credit. Want a German refrigerator for your Shanghai apartment?! Bring 11,000 Yuan. Sorry no 1,000 bills so just bring stacks of 100's.
How can you exist (let alone thrive) in an economy with no "net 30"?!
The answer ISN'T import a US system of credit that Trans Union, Experian, Equifax (or D&B for businesses). China doesn't borrow.
To battle the chicken/egg issue (no borrowing means no credit data), there's a possible option that involves debit reporting analysis. In effect, consumers are evaluated based on the cash they spend.
The UCMS "thin file analysis" (TFA) was developed in the United States to help issuers in situations with limited credit data. Limited credit data situations appeared first when banks sold credit cards to college students. UCMS developed a TFA program ten years before the nearest competitor (Trans Union) and successfully battled the single, largest challenge in underwriting ever: youth credit card accounts.
China faces similar hurdles in that credit information is scarce and scattered. UCMS thin file analysis techniques are to be applied when meshing bank records, cell phone records, housing information, employment data, etc., into a decision making matrix. This matrix can be seen in here...
The UCMS technique differs greatly from the industry practice shown on page 2.
The UCMS Scoreard Matrix uses multiple scorecards set up in a grid
format. The underlying principal is to combine both applicant
supplied information with public data records, private data records and communal credit data. The result: the ablility to evaluate loan applicants and make better credit decisions.
Larry Chiang, founder of UCMS in 1989, utilized a
solid-liquid-gas thermodynamics model as the basis for the credit scoring model.
