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The decline in P2P lending practices is attributed to a variety of social issues. A problem commonly brought up is the debt collection methods, which sometimes involve prohibited measures such as intimidation and violence. Moreover, there is growing concern over high interest rates that affect consumers.
While the government's decision to backtrack on the planned VAT rate hike offers short-term relief, it also erodes public trust and investor confidence amid a shrinking middle class, which points to a need for comprehensive reforms that include labor formalization, downstreaming expansion, human capital development and supply chain integration.
China's perennial underconsumption could very well stem from the country's political system that focuses on stability and control, which is essentially at odds with the free and individualistic behavior that underpins a consumer society – at least, as we know it in the West.
