Loans are part and parcel of life in the western world. In the US, everyone buys on credit. Who's not in debt? Europeans might be a little more cautious but they still tend to take out loans for their homes and their cars. In China, meanwhile, only 30 percent of private-owned property is purchased on credit, and not even 20 percent of cars.

The Chinese mentality is different. Most people would only borrow money from their immediate family, if at all. Anything else is frowned upon. But if the government and the banking industry want this to change, they need to address the issue directly. And that's exactly what seems to be happening. In today's China, money is only a mouseclick away.

The rise of Internet banking

China's first Internet bank opened at the start of the year, after regulators awarded WeBank a license last July. China's financial reform program includes plans for a few new private banks pitched at the growing middle class and indeed more humble customers. Beijing also hopes that the competition will spur state banks into making their services more attractive to private customers – and generally, to raising their game in terms of customer service.

The new bank is run by investors who know their Internet. Tencent, whose many services include social networks, web portals, e-commerce, and multiplayer online games, owns 30 percent of shares. With annual revenues exceeding $8.6 billion, it's the world‘s fifth largest Internet company after Amazon, Google, Facebook and Ebay. Tencent is also behind the world's most successful instant messaging app WeChat. CEO Ma Huateng is one of the wealthiest entrepreneurs in China.

But his rivals on the Chinese market aren't dragging their feet, chief among them Alibaba. Alipay.com, a subsidiary of the e-commerce giant, is a third-party online payment platform with no transaction fees. But it's not a lender. Nor is Yuebao, Alibaba's fund management platform. Moreover its interest rates are significantly higher than those of state banks.

Lending reform

In this respect, the state banks retain their headstart. But the fact that Prime Minister Li Keqiang personally kickstarted the WeBank by being the first to approve via a mouseclick a loan of 35,000 yuan (about $5,600) to a truck driver attests to Beijing's drive to make banks more customer-friendly. The Internet-based private bank allows users to take out loans of up to 1 million yuan (approx. 134.000 euros).

The concept was not in fact developed on the executive floor of Tencent in Shenzhen, but in Beijing. Until now, it was nearly impossible for private individuals to take out a loan at a state bank. Companies were able to do so - especially if they were state-owned - because if it came to a default, the state only had itself to blame. But reform was inevitable, given this untenable state of affairs, not to mention the emergence of a full-blown shadow banking system.

Ground rules

It is, therefore, unlikely that Tencent will have online banking all to itself for much longer. Alibaba CEO Ma Yun has already secured a private banking license and is planning to use it to expand his Internet empire. Then customers who buy online will be able to get a loan directly from the Alibank if they have a cash flow problem. For now, the billionaire's payment service Alipay - which resembles Paypal - can only be used to transfer small amounts, which first have to be acquired in the form of credits.

Beijing rightly hopes that the IT managers will prove more creative, faster, and more unconventional, than state bankers. Competition for market share in the lending sector will quickly change Chinese attitudes to taking out loans. Hopefully, this will not end in the lax attitudes toward credit so common in the US - which all too often result in people drowning in debt - but rather in northern Europe's more moderate level of borrowing. In this respect, the Chinese government will certainly have to lay down some ground rules for the new credit companies.

DW columnist Frank Sieren has lived in Beijing for 20 years and is one of Germany's leading experts on China.