"Buy first, pay later" system can help China boost domestic consumption

XinHua News
"Buy first, pay later" system can help China boost domestic consumption
2008-12-19 13:57:12

By Xinhua writer Jiang Xufeng

BEIJING, Dec. 19 (Xinhua) -- A consumer credit system could help Chinese enterprises better weather adverse effects of the global financial crisis and flagging external demands, a senior analyst told Xinhua on Friday.

Zhao Qiuyan, a senior analyst with the Ministry of Commerce (MOC), said "to bolster credit consumption would help stimulate domestic consumption, reduce inventories and raise companies' capital."

Credit consumption can happen between enterprises, or between enterprises and consumers.

Chinese firms, especially those whose products are export-oriented, have felt the punch of the financial crisis and waning demands. Some are operating under production capacity and inventories were on the rise. They are turning their attention to the domestic market of 1.3 billion people.

The MOC said on its Web site Thursday that average capital turnover rate of Chinese enterprises was only about one fourth of their peers from developed countries.

Capital turnover rate is a measure of a company's ability to use equity to generate revenue. The higher the ratio is, the more efficiently a company is using its capital.

The ministry said that by encouraging credit transaction, domestic manufacturers could raise sales and help small and medium-sized companies qualify for financing -- an long-time obstacle for smaller firms.

Figures from the MOC revealed that credit consumption only accounted for 3 percent of Chinese citizens' monthly bills , much less than the more than 33 percent in Japan and about 67 percent in the United States.

Zhao said the Chinese credit system is still in its start-up period and that this consumption method also involved risks for manufacturers and shopping malls, as it is more difficult for them to perform credit history checks checks.

Zhao said it might take awhile for credit purchasing to catch on.

Some local authorities have began to take measures to clear the obstacle for enterprises. Hangzhou, the prosperous capital city of Zhejiang, said last week it is scheduled to establish a citizen information database of personal credit histories.

She said for those export-oriented companies to get a bigger share of the domestic market, they should also be prepared for a "concept shift" to adapt to the domestic market as Chinese buyers' purchasing habits were different from those overseas.

Editor: Wang Hongjiang