How factory workers are turning the tables on China’s big online lenders

“My Sesame credit rating hasn’t changed in three months,” Jiwei lamented, his voice betraying both bewilderment and frustration.

Jiwei — to protect the identity of my research participants, I gave them all pseudonyms — is 22 years old. A migrant from the countryside, he works in a small factory on the outskirts of the southern city of Shenzhen. He stares at his smartphone screen as we speak, flipping through the pages of China’s ubiquitous payment app, Alipay, one displaying his credit score, the other his detailed purchase history.

In his experience, paying for items via Alipay, either by direct transaction or by credit issued by the app’s sister services Huabei or Jiebei, can help boost his Sesame credit score. This score in turn governs their access to a wide variety of benefits offered by the Alipay financial ecosystem, ranging from higher credit limits and fast cash loans to deposit-free bike rental or hotel accommodation. hotels – each of which can be useful for young migrants trying to settle in a big city like Shenzhen.

It’s no surprise, then, that Jiwei’s fixation on his credit rating was a common motif in interviews with young migrant workers from Shenzhen that I conducted with a research partner in 2017 and 2018. Much of coverage of China’s booming fintech industry has focused on the service platforms themselves, peaking leading to Ant Group’s abortive IPO last November, but which actually use these services? And why? For many Chinese blue-collar workers, the answer doesn’t come down to consumerism, but a desire for financial autonomy and control, or at least the look of it.

The younger generation of migrant workers in Shenzhen were born mainly in the 1990s. Digital natives, they are tech-savvy even before migrating to China’s prosperous coastal areas. This means that they are used to placing an order or paying for their lunch via their phone, and are not averse to borrowing a small amount of money online, if they can.

However, most do not have access to consumer loan programs run by traditional card issuers, in part because of difficulty providing required credit documentation. Some still prefer online credit services. For example, Jiwei justified not having a credit card by saying “I’m not a business person”, pointing out that it was his prerogative not to pursue traditional lines of credit, he considered useless.

The most interesting question is why borrowers are shunning traditional forms of informal finance in favor of services like Huabei. China has a long history of informal borrowing and lending embedded in personal social networks, not to mention more usurious forms of credit such as loan sharks. The latter typically has few barriers to borrowing, but the associated collateral can be risky: a loan seeker’s state-issued ID, their parents’ contact list, even a nude photo. .

(Zhenghan) considered it shameful for a money-earning adult like him to need financial assistance.

Among Shenzhen’s previous generation of factory workers, it was much safer and more common to simply borrow money from co-workers, many of whom would have come from the same city. That’s changing, however, in part because many younger workers appreciate the depersonalized nature of services like Huabei. Zhenghan, a 25-year-old who has worked in cities across China for eight years, said he preferred not to borrow from family or fellow citizens. He considered it shameful for a money-earning adult like him to need financial assistance. “I have my dignity,” he stressed.

Zhenghan first created an Alipay account at the end of 2017. After learning about its online credit functions, he applied for a credit line of 350 yuan (then around $50). He was determined to maintain a good Sésame credit record, hoping that he could one day use it to fund his own business.

As migrant workers embrace depersonalized online lending, they’ve found creative ways to incorporate it into their lives, and even play with the system. For example, Jiwei’s initial motivation for managing his Sesame credit score so intensively was to increase his loan limits, freeing him up to lend more of his salary to friends in need – something that could report to him later if he needed help.

This strategy of integrating fintech into existing social relationships challenges a common assumption made by both the media and fintech platforms themselves: that easy access to credit can turn low-income workers into materialistic consumers and stimulate economic growth. The growing market for digital lending is often associated with the growing consumerism of Chinese society, a stereotype that has been reinforced by the way companies like Ant market their lending services online. A billboard promoting Huabei featured a 37-year-old construction worker who allegedly used the service to take his daughter to a fancy restaurant for her birthday; an advertisement for JD.com’s lending service showed a migrant worker dressed in shabby clothes mocking other passengers on a plane until a man in a business suit showed him how to pay for an upgrade on credit.

But the migrant workers I interviewed at the Shenzhen factory did not take out loans to pay for a fancy dinner or book a business class ticket. On the contrary, they were remarkably savvy about their borrowings and perceptive enough to identify the pitfalls of online lending services. Zhongtian, a 22-year-old worker, was well aware that borrowing can become a problem if not handled carefully. “Once you start, you will create more and more desire until it is way beyond your control,” he said. Similarly, Jiwei expressed concern that borrowing on Alipay would make him “a slave to money.” Instead of turning into prodigal borrowers, these low-income workers have primarily used fintech apps on their phones to navigate their social relationships and manipulate their financial situation in their communities, including projecting an image of themselves as financially independent and generous.

The migrant workers I interviewed at the Shenzhen factory did not take out loans to pay for a fancy dinner or book a business class ticket.

Perhaps more telling is how some migrant workers have played with the opaque algorithms to fool the credit scoring algorithms that rule their lives. This contrasts with what the researchers found in the United States, where low-income American borrowers feel compelled to “play the game,” as academic Mark Kear put it. Jiwei, for example, claimed he found the formula for improving a Sesame credit score: “If you use it, it grows.” He said he would pay for his coworkers’ online purchases with his own credit and occasionally help top up his parents’ cellphone balance. This has both bolstered his reputation as a caring person and also helped him establish a better credit history. In an even bolder move, he used his personal credit account for business expenses, which helped him establish credit good enough to increase his borrowing limits.

This does not mean that we should idealize the relationship of migrant workers with online credit systems. Ultimately, the game is asymmetrical, and the apps’ black box-like algorithms can sometimes frustrate users. And many migrants still buy into the myths of self-made wealth surrounding China’s tech moguls.

But we must not neglect the action of migrants either. Already, blue-collar workers are punching well above their weight, as they engage in fintech along very different lines than what the tech giants envisioned integrating it into their own offline worlds and communities. The ant gets all the attention, but the ants matter too.

Editors: Cai Yineng and Kilian O’Donnell.

(Header image: Young migrant workers check their mobile phones at a factory in Dongguan, Guangdong province, December 31, 2015. Zhan Youbing/People Visual)

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