The Quick Loans of Mr. Wang’s

Written by Julen Madariaga on January 4th, 2009

When I left China for the holidays I was pretty sure I would not manage to write a single line on the blog until my return. China is such a stimulating place that every day I am jotting down notes, and my blog runs 20 posts behind myself. In Europe the stimulus would stop - I thought- and I would get some rest.

As it turned out, I had forgotten the sms. I’ve been receiving a continous flow of text messages from China that have inpired me a good deal more than I would have wished. Every little spammy sms is a concentrate of Chinese characteristics, and one that tells a lot about the country if you read it carefully. Look at the one we have here, for example.

Exhibit 1 above is one of the first text messages that greeted me in 2009. It is an interesting one, and I thought I would blog it for its Chinese language and economics interest.

First of all, here is the translation:

Dear Sir,  the Nanguang Group in this city provides for those who lack funding small loans at 3% interest monthly , 10% yearly. Guarantee not needed. Interested call Manager Wang.

OK, this is not exactly news, quick loans spam have been coming in for a while already. I suppose anyone in Shanghai who gives his name card around as easily as I do gets the same, but surely I am the only foreigner who cares to read them all as they come. Because it is my mandarin homework.

This has allowed me to see the messages getting more frequent and more dodgy as the Crisis pushes into China over the last months. In the field of dodginess, this one sets a new high, featuring:

1 - Commas inserted in random places, probably to avoid automated searches for character strings.

2 - Interest of 3% monthly becoming 10% a year, when my financial calculator gives 43% yearly interest for a 3% monthly compound.

3 - Slightly more disturbing: as far as I have been able to ascertain on the internet, the Nanguang Group does not exist.

As a consequence of the financial Crisis official banks are tightening their conditions and it has become difficult for many Chinese to get a loan. This is the reason why “underground banks” (地下钱庄) seem to be flourishing these days.  Danwei recently reported that the government is planing to legalize private lenders, and set some limits to the interest they can ask. Obviously, Mr. Wang still hasn’t heard about this.

There has been a lot written about the parallel financial system of China, and how, from the beggining of reform, it has helped start many family businesses. However, this sms looks like the dark side of the system, and I would strongly advise everyone to stay away from these deals. If only for one reason: the loans are being offered indiscriminately on cell phones, which means that there is no real guanxi (network) contact between the lender and the borrower.

The main problem with these no-questions-asked credit is that somehow the lenders need to make sure that their loans don’t go bad.  In case of non performance, they cannot follow the legal procedures (since they are illegal) and they cannot appeal to a family network (since there is none). Surely they have some  convincing reasons to remind the debtors of their obligations.

So please stay out of trouble and do not call Mr. Wang.

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Comments so far ↓

  1. Jan
    xiao lu

    Welcome back! I have received one for selling military weapon. :) )
    I never understood why don’t some authorities take action on those spammy sms, since they leave the phone number there, same as the “Graffiti” of fake certification producers and other illegal ads posed everywhere.

    [Reply to this comment]

  2. Jan

    Yes. Actually I am doing a service for the community when I post about spam sms, as I give their number away on the internet. This is my little revenge for receiving 20+ spam sms a day.

    Wow, I never got one of those offering weapons, if you do get one again please forward to me!

    [Reply to this comment]

  3. Jan

    It seems like anyone who seeks out a loan provider via SMS spam is pretty foolish. Obtaining loans in China is definitely a challenge and it is easy to see how the 地下钱庄 have emerged. I think a safer, and more legal, channel for obtaining loans in China is through peer-to-peer (p2p) lending platforms. Welcome back from your trip and keep the great posts coming!

    [Reply to this comment]

  4. Jan

    p2p lending?? hm, I didn’t know about that one. And how do they ensure that people pays back? I guess I will wait until China Observer publishes something about it.. :)

    By the way, this post seems to have supernatural spam attracting properties. I got already 10 pingbacks from shady websites offering me loans. Looks like “Quick loan” is only second to Viagra in the spammers list. Of course, this means a lot of people are buying too.

    [Reply to this comment]

  5. Jan

    “There has been a lot written about the parallel financial system of China, and how, from the beggining of reform, it has helped start many family businesses.”

    Any reading suggestions?

    [Reply to this comment]

  6. Jan

    @davesgonechina - It is a well documented phenomenon. There surely must be better specialized material out there, but I just read it in general China books, like the well known “China, Inc”.

    If you find some interesting material about it please let me know.

    BTW, nice blog, and nice avatar :)

    [Reply to this comment]

  7. Jan

    My references above are a bit weak. Check also this Caijing article, including the text below. You can find many references to this in China blogs and publications, and there surely must be some research work available. I would be grateful if someone points me to one.

    “In Hunan, southern China, underground banks unlawfully raise funds, guarantee financing and issue high-rate loans while disguising as ordinary businesses such as pawn shops and third-party loan guarantee firms.

    In Zhejiang, underground banks function as “clubs” in which facilitators invite relatives and friends to join. Gradually, a fund’s size may grow until it can finance business operations. But some clubs later evolve into vehicles for financial fraud. “

    [Reply to this comment]

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