When Ant Group released its investor prospectus leading up to the financial technology (fintech) giant’s aborted November initial public offering, it was a reminder of just how long the reach of its ubiquitous payments app, Alipay, has grown. But the company has expanded far beyond a digital wallet for processing transactions: Between June 2019 and June 2020, 729 million people used one of Ant’s financial technology offerings to do everything from investing in mutual funds or insurance to borrowing money through its lending services Huabei and Jiebei — “Just Spend” and “Just Borrow,” respectively.

Nor is Ant the only company angling for a piece of China’s emerging fintech market. Prior to a recent antitrust campaign, a number of Chinese tech giants, including JD.com, Meituan, and ByteDance, either had or were in the process of developing their own fintech offshoots. Rival Tencent has taken advantage of Ant’s mishaps to greatly expand its own microlending services.

How did this market get so big, so fast? The reasons are complicated, but one oft-ignored aspect is the way these services personalize and moralize credit and lending in a way that fits into the country’s traditional lending practices. To understand how, it’s helpful to start by outlining the cultural history of borrowing and lending in Chinese society.

Despite its reputation as a “nation of savers,” Chinese society has traditionally been heavily reliant on debt, facilitated through a long tradition of private and informal borrowing and lending. In this system, instead of concepts like “credit,” an individual’s access to loans largely depended on what’s known as renqing — literally “human sentiments.”

Like credit, renqing refers to a social obligation that entails the exchange of economic resources. But it is also deeply rooted in kinship and social networks, the most important components in Chinese people’s social relations. Governed by the principle of renqing, Chinese were willing to give away the products of their labor, the raw materials of production, or even direct monetary assistance to people in their social networks, expecting to receive a return when they themselves were in need.

Although not a direct equivalent, renqing operates similarly to what anthropologists might term “reciprocity.” Early anthropologists like Bronisław Malinowski and Marcel Mauss — who studied gift-giving practices in certain western Pacific islands beginning in the 1920s — argued that gift exchanges in archaic human society were never altruistic or one-offs, but continuous and conducted in anticipation of an eventual return, whether political, economic, or something else.

Credit and loan activities were likewise interwoven into the social nexus of ancient Chinese society. People increased their credibility by performing renqing within their social networks and demonstrating their moral character, which required continuous participation in the cycle of giving and receiving. Ways of building renqing could be tangible, as in giving gifts on social occasions, or intangible, such as helping organize community events or showing loyalty to one’s family and clan.

An interesting case worth mentioning are the hui lending practices of southeastern China. These involved a more institutionalized form of the renqing-based credit loans within kinship networks. In the coastal provinces of Fujian, Guangdong, and Zhejiang, hui consist of members who make regular contributions to a common fund in agreed-upon cycles and negotiate the terms of withdrawals, including the amount of credit, loan terms, and interest rate.

Legal protections or formal processes are absent in such intuitions, but everyone is morally constrained by the fear of social ostracism or loss of face. They are also motivated to participate in communal activities, grassroots cooperative projects, and village management to further demonstrate their credibility.

This credit self-management logic continues to function even today. Ant’s Huabei and Jiebei, to say nothing of similar services, at times operate under a surprisingly similar framework, albeit updated for the 21st century. They purport to assess the credibility of users through the comprehensive data portfolios they can compile: Ant’s ecosystem integrates online payments, social media, and everyday services ranging from food delivery to utility payments. Indeed, they’re so comprehensive, they’ve come in for serious criticism on privacy and antitrust grounds.

The algorithms for converting this data into a credit score are opaque, but some — like social relationships and consumer behavior — are vague enough to imply that users can manipulate and maintain their credit through conscious engagement. For example, frequent chats, transactions, and interactions with friends using gift-giving functions and joint games available on the app are encouraged. This reminds users — longtime participants in China’s informal finance system — of well-established practices like participating in communal activities and social networks to gain renqing and prove one’s creditworthiness.

These apps’ aggressive use of visualization and pop-up notifications, which alert users to any changes in their credit scores and history, only makes the effects of users’ efforts more tangible. Their anticipation of turning their use of the app into a higher credit score further instills in them a positive correlation between their morality and credibility.

This is sometimes integrated into preexisting practices. One migrant factory worker I interviewed in Shenzhen told me he used a major microlending service to take out loans specifically so he could keep taking part in his village’s credit network. He’d lend out his entire salary to his friends back home, then live on digital credit until his next paycheck. This may not be a sustainable or desirable use of online lending, but it allowed him to keep one hand in his traditional networks, and another in the fintech-powered digital future.

Practices such as these help explain why fintech grew so quickly in China. Online credit and loans are a novel form of finance that has benefited from the rapid expansion of the internet and the vacuum in the consumer finance market. But fintech services have also tapped into something much older: a community of highly profitable potential borrowers schooled in long-term engagement with a personalized, moral form of credit. As regulators move to bring this previously runaway sector under control, remembering that context — and reflecting on how it’s shaped the company-consumer relationship — is more crucial than ever.

Editors: Cai Yineng and Kilian O’Donnell; portrait artist: Wang Zhenhao.

(Header image: Shijue Focus/People Visual)