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China Scrutinizes $43 Billion Pawn-Shop Lending Boom

  • Financial regulator is drawing up new rules for the sector
  • Small businesses use pawn shops for short-term loans
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China’s pawn shops may be growing too big for their own good.

Unlike their small-dollar lending, used-guitar selling peers in middle America, pawn shops in Asia’s largest economy have become a major force in the shadow-finance industry. They lent the equivalent of $43 billion in 2017, often to small businesses and at much higher interest rates than banks. The number of Chinese pawn shops has doubled since 2010 to more than 8,500 and their average loan size exceeds $26,000, versus around $100 in the U.S.