Valued at $11.7 billion, Chinese peer-to-peer lender Qudian is now the largest Chinese company listed in the United States. It is also the fourth biggest IPO in the United States this year.
The company, as reported previously, uses a combination of social and financial data gathered via Alibaba’s Ant Financial, which is also a minority investor, to provide credit scores for millions of un-banked and under-banked Chinese students and workers. This method has allowed it to provide $5.6 billion worth of credit to 7 million borrowers during the first half of 2017, alone.
This system is common in China, where methods of credit scoring popular in the United States simply won’t work due to much of the populations lack of what some have called “traditional credit data,” i.e., that which is generally preferred in the Western world. However, it has raised some red flags in the U.S., with outlets such as Business Insider labelling the practice of social credit scoring as a sort of social control mechanism and pointing out that such data could be used to shut out individuals with political and social values that deviate from the Chinese norm.
If U.S. investors agreed with this assessment, it certainly didn’t show in the IPO. Qudian raised $900 million in its share sale, and its shares rose a staggering 48% on Wednesday, when it debuted in the U.S. market. If this is a culture clash, then the clash simply hasn’t happened, yet.
Besides the potential cultural mistranslation that could very easily result from the use of such data in a credit scoring system in this country, the Financial Times points out there are also a number of other factors that make some analysts wary of putting too much stock, as it were, in microlending company’s like Qudian. These include domestic regulation, which have recently limited certain online financial products from charging too much interest (defined as anything over 36%), for example.
It is unclear whether or not these factors may cause trouble for Qudian down the road. For now, though, the company is garnering a great deal of positive attention and investment during its first few days in the U.S stock market, and its prospects seem bright.
Meanwhile, the company’s success serves as an interesting example of how well credit with Chinese characteristics might hold-up in an international setting.2 - Readers Like This Post