FEATURE: China’s pawnshops now cater to relatively affluent+
BEIJING, Dec. 28 Kyodo
Pawnshops used to be a haven for the poverty-stricken masses in old China to raise meager amounts of hard cash to tide over difficult times.
But the poor are no longer welcome in pawnshops. Instead, pawnshops are becoming ”second banks” for relatively affluent people in some parts of China.
The functions of today’s pawnshops have expanded to include raising funds for stock market investments, business, education and even for travel, industry sources said.
In the past few years, banks have assumed most large loans since they began offering consumer credit services, leaving relatively small loans to pawnshops — particularly those under 1,000 yuan ($120.8) with a time limit of 10 to 15 days.
Yu Yulin, secretary of the Nanjing Pawnbroking Society, said the convenience of pawning, without the time consuming paper trail needed to get a bank loan, is attractive on a small-scale, short-term basis.
The range of objects pawned has expanded, as well.
Gold jewelry now accounts for less than half of all pawns in 12 Nanjing pawnshops, down from 80%. More people are pawning platinum and diamond jewelry, brand-name watches, paintings, calligraphy, antiques, negotiable securities and even cars.
This development was dictated partly by what pawnbrokers were willing to accept.
In Guangzhou, for example, personal electronic products such as mobile phones, personal computers, color TVs and pagers are no longer being accepted as collateral by many businesses.
Firms that do still allow electronic products to be used as collateral have reduced their acceptance to a limited selection.
A Guangzhou Tong Tai Pawnbroker representative said that electronic appliance collateral accounted for only 2-3% of operation turnover in recent months.
Income derived from these goods has declined more than 50% when compared with the same period last year.
The Guangzhou Public Auction House also stated that, in general, it would ”no longer accept electronic machinery as collateral no matter what the circumstances.”
The main reason for pawnbrokers’ reluctance to accept these products is their inability to maintain a consistent value. Due to frequent upgrades, continual price cuts are necessary to shift electronic products.
With some products becoming outdated within six months, clients are reluctant to reclaim these items, resulting in lost revenue for the pawnbrokers.
Some firms in Guangzhou have reported losing more than 100,000 yuan from sustained price cuts on personal computers in recent years.
Real estate is the current preferred form of collateral. Jewels, vehicles and brand-name watches are all highly rated because of their high value and dependable prices.
Some financial analysts predict that as pawnbroking continues to develop and gain wider acceptability even intangible assets like brands and intellectual property could eventually be pawned.
The business is also emerging as a new source for securities financing.
The Chongqing Yucai Pawnshop, Fayoo.com and Southwestern Securities Brokerages have begun jointly offering a stock collateral financial service oriented toward individuals.
All pawnshops previously under the supervision of the People’s Bank of China, the central bank, were handed over to the State Economic and Trade Commission to be administered as a special category of enterprise.
According to the rules issued by the Yucai Pawnshop, individual investors can use all assets in their securities accounts as collateral.
When a loan application is approved, the pawnshop should immediately deposit money into the personal account of the applicant, who can use the loan to buy stocks.
Fayhoo.com has established cooperative relations with Southwest Securities Co. and the China Construction Bank to offer this service.
Individual investors must first open an account with the securities company and then sign separate agreements with the pawnshop, Southwest Securities Co., the auction house and Fayhoo.com.
With respect to risk prevention, the Yucai Pawnshop said it would ”exercise real-time monitoring of the market value of the collateral.”
It also stipulated that the stock of loss-making companies could not be used as collateral.
Pawnbroking, which has been around in some form for many centuries, is now moving into the high-tech 21st century.
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