Xu Hai got the promotional ad in a text message just when he was desperate for cash. It was summer 2020, and the 37-year-old Foxconn worker from the inland Chinese province of Hunan had been unemployed for months. Xu was no stranger to microloans: he had been taking them out since 2018, first from a few national banks and then from fintech platforms like Alipay and WeChat. The pandemic had made his financial situation even worse. He needed to borrow more.

The text urged Xu to borrow directly from Meituan, a tech company that has developed from a Yelp-like app to a mammoth corporation offering food delivery, bike-sharing, ride-hauling and more.

Xu accepted the offer because he needed to pay back the other loans he'd taken on. And Meituan was not the only place he turned. Now, Xu owes money to eight microlenders, five of which are household names in Chinese tech: Alipay, WeChat, Meituan, 360 and Xiaomi. These days, seemingly every Chinese app, whatever its original purpose, also pushes to lend users money. "Weibo tells me it can lend me money; the delivery app tells me it can lend me money; and now even the photo editing app tells me it can lend me money," wrote one Weibo user last month. "I have 32 apps on my phone. Probably 30 of them have turned into microlending apps."

Xu is now unable to climb out of debt and is battling depression.

Over the past year, non-fintech-turned-fintech apps have come under intense scrutiny by the Chinese public and the state. There's a growing concern they have tricked young people into overspending and pushed the overall amount of consumer debt to a dangerous level. The Chinese government proposed new rules in November to ramp up regulation over online microloans. Even though the rules are not official yet, their forecasted effects have already caused the suspension of Ant Group's blockbuster IPO. When they become official, they're almost certain to put a brake on tech companies' lending binge.

"China is the first large country where technology companies have turned into large financial intermediaries," Sampath Sharma Nariyanuri, a fintech analyst at S&P Global Market Intelligence, told Protocol.

A brief history of microlending

China's major tech players have been operating microlending services for years; it's one direct way to monetize a massive user base. For payment apps like Alipay and WeChat, it's a natural fit. In late 2014, Alibaba affiliate Alipay released Huabei, an online credit card-like service that allowed users to buy items on Alibaba's ecommerce platforms using credit. Ten months later, the company released another service, Jiebei, which offered unsecured microloans that could be used anywhere. The two products became popular almost instantly.

PROTOCOL | CHINA Chinese microlending is getting weird and dangerous Every app now wants to lend you money. It's driving some users into debt and foreshadows a broader crackdown. Chinese microlending is getting weird and dangerous Close-up of Mao Zedong's portrait on 5 Yuan RMB,10 Yuan RMB,100 Yuan RMB (China Currency). | Image: hudiemm/Getty Images Zeyi Yang February 9, 2021 Xu Hai got the promotional ad in a text message just when he was desperate for cash. It was summer 2020, and the 37-year-old Foxconn worker from the inland Chinese province of Hunan had been unemployed for months. Xu was no stranger to microloans: he had been taking them out since 2018, first from a few national banks and then from fintech platforms like Alipay and WeChat. The pandemic had made his financial situation even worse. He needed to borrow more.

The text urged Xu to borrow directly from Meituan, a tech company that has developed from a Yelp-like app to a mammoth corporation offering food delivery, bike-sharing, ride-hauling and more.

Xu accepted the offer because he needed to pay back the other loans he'd taken on. And Meituan was not the only place he turned. Now, Xu owes money to eight microlenders, five of which are household names in Chinese tech: Alipay, WeChat, Meituan, 360 and Xiaomi. These days, seemingly every Chinese app, whatever its original purpose, also pushes to lend users money. "Weibo tells me it can lend me money; the delivery app tells me it can lend me money; and now even the photo editing app tells me it can lend me money," wrote one Weibo user last month. "I have 32 apps on my phone. Probably 30 of them have turned into microlending apps."

Xu is now unable to climb out of debt and is battling depression.

Over the past year, non-fintech-turned-fintech apps have come under intense scrutiny by the Chinese public and the state. There's a growing concern they have tricked young people into overspending and pushed the overall amount of consumer debt to a dangerous level. The Chinese government proposed new rules in November to ramp up regulation over online microloans. Even though the rules are not official yet, their forecasted effects have already caused the suspension of Ant Group's blockbuster IPO. When they become official, they're almost certain to put a brake on tech companies' lending binge.

"China is the first large country where technology companies have turned into large financial intermediaries," Sampath Sharma Nariyanuri, a fintech analyst at S&P Global Market Intelligence, told Protocol.

A brief history of microlending China's major tech players have been operating microlending services for years; it's one direct way to monetize a massive user base. For payment apps like Alipay and WeChat, it's a natural fit. In late 2014, Alibaba affiliate Alipay released Huabei, an online credit card-like service that allowed users to buy items on Alibaba's ecommerce platforms using credit. Ten months later, the company released another service, Jiebei, which offered unsecured microloans that could be used anywhere. The two products became popular almost instantly.

But it's gotten bewildering as other apps, many totally unrelated to fintech, have joined the game. Of the 20 most commonly used apps in China — ranging from photo editing to file sharing, from maps to streaming platforms — all have some kind of in-app loan services, according to Chinese tech site iFanr.

The growth of Chinese fintech platforms really turbocharged around 2015, said David Yin, vice president and senior analyst at Moody's financial institutions group. "Financial innovation was encouraged at that time, with very loose regulatory requirements," he told Protocol.

Things quickly got weird as a jumble of tech companies that didn't work in finance joined the party. Tencent and Baidu launched their microlending service in 2015; JD, the ecommerce platform, in 2016. In the years since, hardware manufacturers like Xiaomi and (non-fintech) software companies like Weibo, Meituan and ByteDance all rolled out their own microlending products. They had good commercial reasons for doing so: Offering microloans can attract new users, create a new stream of revenue and reduce fees to credit card issuers for transactions on the platform.

But it was the lack of traditional banking services that made it possible in the first place.

"The low penetration of traditional banking services provided an opportunity for the tech companies to step up and meet customers' credit needs," Sharma Nariyanuri said. For the generation that grew up with smartphones, going to an online credit service like Jiebei is more natural than applying for a credit card.

Caveat emptor

It's now easier to count the major tech players that don't offer microloans than to count those that do.

With so many options on the market, they have to compete for attention, with predictably annoying and dangerous effects.

Weibo users complain the app is constantly promoting its microlending service through mobile ads with only a tiny tag signifying they're advertisements. "Even if you are in urgent need of money, you shouldn't go to illegal lenders! Come to Sina's official lending services," reads one of the posts. That ad also boasts that the maximum loan is about $30,000, with daily interest rates as low as 0.03% — that sounds low, but isn't when compounded over the course of months or years. Many lenders, including Weibo and Meituan, have been accused of false advertising: Users complain they were tricked into starting a service with no knowledge of processing fees. After all fees, the real annual interest rate is often around or even higher than 36%, the maximum rate allowed by Chinese law. There are countless complaints on social media about debtors being bombarded with calls, texts and WeChat messages, some even sent to their colleagues and friends, pressing them to pay loans back.

Financial regulators have been slow to address these issues, partly because the Chinese state was previously preoccupied with systemic risk from (unregulated) peer-to-peer lending services.

But now microlending from big tech has their full attention. During a December press conference, the China Banking and Insurance Regulatory Commission laid out the risks posed by fintech platforms. "There exist problems like unsound corporate management, profiteering off data monopoly, encouraging over-borrowing and overleveraging," a spokesperson said. The regulator also said it would conduct more inspections of individual platforms.

It is not clear when new rules aimed at cutting microlending down to size will take effect, or how tech companies will respond. There could be workarounds, particularly for companies that can obtain licenses to operate "consumer finance" businesses, an area the new rules don't touch.

But it's clear the era of loose fintech regulations is over. Online lending "will be subject to a similar regulatory framework as that for traditional financial institutions," Yin said. When that day comes, some beloved Chinese apps may have to turn their attention away from pushing loans, and go back to whatever they do best.

There’s a pretty good chance that any new Bitcoin generated after the cryptocurrency’s Elon Musk-aided surge toward $50,000 will be sourced using cheap coal power in China’s Xinjiang.

The region that’s become notorious in recent years for complaints about abuse of Uyghur Muslim minorities is also a hub for the production of Bitcoin. Nearly two-thirds of global output took place in China as of April 2020, according to University of Cambridge researchers, and about one-third of that occurred in Xinjiang.

The main draw is the cheap power needed to run the computers that perform the complicated equations for so-called “Proof of Work” that confirm transactions without a third party, which forms the biggest part of a miner’s outlay. However, unlike the almost carbon-free mining in places like the Nordic region, most of the electricity in Xinjiang is still produced using polluting coal plants.

“Cheap and reliable electricity is really essential,” said Amanda Ahl, a BloombergNEF analyst. “It affects how much profit miners can make.”

Electricity-intensive industries like aluminum smelting and polysilicon production have long been drawn to Xinjiang because power rates there are extremely low — as little as 0.22 yuan ($0.03) per kilowatt-hour, compared with 0.6 to 0.7 yuan in central China, according to BloombergNEF.

The main reason for that is coal. While Xinjiang has a fast-developing renewable sector, with wind turbines dotting the hills around Urumqi, it still accounted for less than a quarter of electricity generated last year.

Coal makes up the bulk of the remainder. The province is blessed with vast reserves of the fuel, but no economical ways of moving most of it to population centers in central and eastern parts of the country.

On a grand scale Bitcoin mining consumes relatively little power. It probably represented about 0.2% of China’s total electricity demand in 2017, according to a 2018 BloombergNEF study.

China’s unmanned spacecraft Tianwen-1 went into orbit around Mars on Wednesday night, state media reported, as international efforts to explore the red planet heat up.

After a 15-minute deceleration, the unmanned spacecraft was captured by the Martian gravity and began to circle the red planet in a large elliptical orbit, according to state news agency Xinhua.

It comes just hours after the Hope satellite launched by the United Arab Emirates did so. Nasa’s Perseverance rover will join them next week.

China is a latecomer to Mars.

Five other countries have already been there, including India. In 2011, China made its first attempt with a small orbiter Yinghuo, or Firefly, hitching a ride on Russia’s Fobos-Grunt mission. But a launch failure meant it never left the Earth’s orbit.

Over the next couple of months, Tianwen will circle Mars and collect information about the environment below.

A lander is expected to separate from the orbiter around May to make a soft landing on Utopia Planitia, a large, rock-littered plain.

The lander has a robotic rover that will roam the landscape, investigating a wide range of features from soil properties to material composition, water, ice, air quality and magnetic fields, according to the Chinese space authorities.

For a first-timer, this is a complex mission.

Only the United States and the former Soviet Union have managed to land spacecraft on Mars, and these manoeuvres were preceded by many fly-by or orbiting missions.

Since the former Soviet Union’s Mars 1M No 1 mission on October 10, 1960, nearly 50 attempts have been made to visit the planet and about half have failed.

Ken MacTaggart, Britain-based space historian and author of the Haynes Astronaut Manual, said the Tianwen’s orbit insertion might seem simple but was no easy task.

With a time delay of 10 minutes between Earth and Mars, the Tianwen would need to fire up its engines while out of radio contact with the controllers in Beijing.

“All commands and control sequences need to be thoroughly checked to eliminate any errors, and then sent to the spacecraft well in advance,” said MacTaggart, who is co-editor of the Apollo 11 Flight Journal for Nasa’s history division.

He said that to “brake” the Tianwen would need to turn so its rocket engine faced the direction of travel, then pressurise the fuel tanks and start the engine.

“All of these complicated events need to happen in the correct time sequence. If the engine firing happens late, or the burn time is short, Tianwen 1 will sail past Mars into a wide orbit around the sun,” MacTaggart said.

“Entering orbit around Mars, with no possibility of help from Earth if anything goes wrong, is an extremely challenging task. Mars probes from other nations have often failed at this step, and a very expensive American Mars probe exploded when pressurising its fuel system before ignition.”

The US remains the lead player on Mars.

It has launched more than 20 missions to the planet, two involving rovers. The projects greatly expanded knowledge of Mars, including the Spirit rover mission’s 2004 discovery of evidence of water.

China’s space technology has been catching up rapidly in recent years. China made the world’s first landing at the far side of the moon and brought back lunar samples at the end of last year. The success of these missions suggested that China had acquired the critical technology for deep space missions, which depend heavily on autonomous software and hardware, according to some space experts.

A Beijing-based space scientist said China had also learned a lesson from the Soviet Union and would not engage in a costly space race with the US for political reasons.

“Chinese are pragmatic. There may be an allure to race to the moon or Mars. But we stick to our own pace,” said the government researcher who requested not to be named due to media policy.

The Tianwen-1 is the first of a series of spacecraft that China plans to launch to explore the other planets in the solar system. While the US is looking at manned space missions to the moon and Mars, China is opting for robot missions because of concerns about costs and risks, according to the researcher.

But Chinese astronauts will be working on the country’s first space station, with construction expected to start this year in lower-Earth orbit. “It will be an extremely busy year for Chinese space programme,” the researcher said.