A fintech lender rebound, and a hotel mess

“There is a growing belief among consumers and investors alike that Beijing’s measures are finally breathing life back into the economy.”

By Doug Young & Rene Vanguestaine

China’s business landscape is at a critical juncture, marked by promising recovery signals in the embattled private fintech lending sector and fresh challenges in international expansion by major Chinese corporations. These twin stories underscore both the resilience and vulnerabilities in China’s evolving corporate landscape.

After years in the wilderness, China’s embattled private fintech lenders are finally showing signs of revival, driven by improved consumer sentiment and strategic policy shifts from Beijing. Jiayin, a sector standout, recently reported impressive 46% revenue growth for its main loan facilitation business in last year’s fourth quarter, forecasting similar strength for this year. This optimism isn’t isolated — several peers, including X Financial, have reported robust results, signaling a broader sector recovery.

The reasons behind this turnaround are straightforward but compelling. China’s consumer lending market remains vast, despite sluggish spending overall. The number of active fintech lenders has dramatically shrunk, leaving fewer competitors to serve a large and underserved market. Additionally, enhanced risk management through AI and improved technologies has allowed these companies to better manage defaults, bolstering their profitability.

Beijing’s persistent efforts to stimulate consumer spending are finally bearing fruit, fostering confidence among borrowers and lenders alike. Investor attitudes are shifting accordingly, with stock prices in the sector rebounding significantly from their long-term lows. Jiayin’s stock, for instance, has more than doubled over the past year.

For investors considering these stocks, caution remains key. The sustainability of this recovery will largely depend on China’s broader economic indicators and consumer confidence trends. Investors should carefully monitor these factors, alongside companies’ strategic moves to expand internationally — decisions that, as Jiayin’s misadventure in Nigeria demonstrates, can introduce substantial and unforeseen risks.

A German headache for a Chinese hotel giant

Meanwhile, Chinese hospitality powerhouse, H World Group, offers a stark lesson in the perils of international expansion. Its 2019 acquisition of German luxury hotel operator Deutsche Hospitality, celebrated initially as a milestone in global expansion, has turned into a costly ordeal. Persistent operational issues and ongoing restructuring charges nearly wiped out H World’s fourth-quarter profits, underscoring a familiar story: Chinese firms snapping up seemingly bargain-priced overseas assets only to later uncover deep-seated issues.

Why do Chinese companies keep pursuing these risky ventures despite such a dismal track record? Part of it might be hubris, fueled by domestic success and a desire — or perhaps political pressure — to build global empires. But these aspirations often run into stark cultural and operational challenges. TCL’s troubled purchase of Thomson two decades ago highlighted such pitfalls, including stark differences in labor relations and management styles.

For H World, sticking with Deutsche Hospitality might yet pay off if the restructuring efforts succeed. However, management’s lack of transparency about the issues involved doesn’t inspire confidence. Acquiring foreign brands and successfully integrating them requires exceptional managerial acumen and strategic clarity, not merely ambition or political encouragement.

Ultimately, the success or failure of these overseas adventures comes down to whether management truly understands its business strengths and competitive advantages. Too often, Chinese companies have been motivated by fashion, hubris, or political imperatives rather than clear business rationale — a recipe for disappointment or even disaster.

About China Inc

China Inc by Bamboo Works discusses the latest developments on Chinese companies listed in Hong Kong and the United States to drive informed decision-making for investors and others interested in this dynamic group of companies.

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