cross-posted from: https://lemmy.sdf.org/post/54826410
As many as 100 million Chinese consumers are struggling to service their personal debt, fueling a largely hidden crisis that threatens Beijing’s efforts to revive the world’s second-largest economy.
Bad consumer loans from credit cards to mortgages have surged over the past few years. Nonperforming household debt soared 21% last year to a record of at least 2.22 trillion yuan ($329 billion), according to Gavekal Dragonomics.
...
The firm analyzed financial reports from 26 banks and other data sources after authorities stopped releasing aggregate figures on delinquent and defaulted personal loans. Analysis from Zhejiang University’s Institute of Financial Research said Chinese financial institutions could have nonperforming personal debt totaling 2 trillion yuan to 3 trillion yuan to dispose of annually.
The estimates suggest that as much as 10.6% of China’s 1.1 billion adult population were behind on debt payments at the end of 2025.
“Personal bad loans will continue to pile up,” said Xiaoxi Zhang, China finance analyst at Gavekal. The situation is unlikely to improve without more aggressive government policies to alleviate income pressures and financial strains, she said.
...
Much of China’s short-term debt boom has been driven by loan platforms operated by tech giants, including mobile payments leader Ant Group and short-video specialist ByteDance. They act as go-betweens for banks and borrowers, offering loans carrying annualized interest rates from 4% to more than 24%.
Yet even as bad debt mounts, these platforms continue to aggressively push loans with slogans like “instant disbursement,” “low interest,” and “low threshold” that show up when users log into their mobile apps.
...
The consumer credit squeeze comes as the banking sector grapples with a protracted property slump and mounting corporate defaults. While official data pegs the industry’s nonperforming loan ratio at just 1.5% as of March, analysts widely believe the figure vastly understates the true volume of delinquent debt.
Stress signs are already showing at the top. At Industrial & Commercial Bank of China, the nation’s largest lender with more than 145 million active credit cards, the NPL ratio for credit card debt surged more than a percentage point last year to 4.61%, dwarfing the bank’s overall NPL ratio of 1.31%.
As much as 5% to 6% of retail loans at some of China’s large banks could be nonperforming, according to May Yan, head of Asia financials research at UBS Group. Delinquency rates are likely even higher at smaller lenders, she said.
...