Building a Conceptual Model of Factors affecting Personal Credit and Insolvency in China based on the Methodologies used in Western Economies

Grzegorz Majewski, Abel Usoro, Pattarin Chumnumpan

Research output: Chapter in Book/Report/Conference proceedingChapterpeer-review

Abstract

Chinese economy is developing at an unprecedented pace. This expansion is prominent not only in the external aspect (increased export), but also internally in the increase in the demand for goods and services by common Chinese families. This demand cannot always be met by the monthly salary and therefore the need for personal credit. Because of the substantial risk involved in lending, there is need for robust and reliable credit evaluation procedures, strategies, policies, and systems. Lessons learned from the subprime mortgage crisis in U.S. are that lending can be a very risky activity that can lead to recession for a whole economy. Banks and other financial institutions in China are in need of appropriate procedures and systems should a barrier to further economic development be avoided. Besides, existing models and systems that are prevalent in the West may not fully match Chinese banking environment or the society itself. An appropriate personal credit rating methodology should take into account the differences between the Western and Chinese society and culture. There apparently does not exist such a methodology in literature that takes into consideration the unique Chinese situation. The aim of this chapter is to begin to fill this gap in knowledge by building a conceptual model of factors influencing demand for consumer credit and insolvency (bad debts) in China, based on the available methodologies used in the Western societies.
Original languageEnglish
Title of host publicationLeveraging Developing Economies with the Use of Information Technology
Subtitle of host publicationTrends and Tools
EditorsAbel Usoro, Grzegorz Majewski, Princely Ifinedo, Iwara Arikpo
Place of PublicationHershey, PA, USA
PublisherIdea Group Inc
Pages204-215
Number of pages12
ISBN (Print)9781466616370
DOIs
Publication statusPublished - 2012

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