As many as 100 million Chinese consumers are deeply trapped in personal debt, resulting in more than 2.22 trillion yuan (about 1.34 trillion ringgit) in bad loans, which poses a threat to China's economic recovery.
In a lengthy report published Thursday, Bloomberg pointed out that in recent years, Chinese consumers' bad credit loans—including credit cards, mortgages, and other forms—have surged, severely weakening the authorities' efforts to stimulate domestic demand.
Research organization Gavekal Dragonomics, after analyzing the financial reports of 26 banks, revealed that last year, Chinese households' bad debts soared by 21%, reaching a historic high. Last year, China's authorities stopped publishing aggregate data on overdue and defaulted personal loans.
The analysis by Zhejiang University Institute of Financial Research also estimates that Chinese financial institutions may need to handle 2 trillion to 3 trillion yuan (about 1.21 trillion to 1.82 trillion ringgit) in personal non-performing debts every year.
These estimated figures indicate that by the end of 2025, as many as 10.6% of China's 1.1 billion adult population could face overdue debt issues.
The heavy personal debt burden is dragging down the authorities’ efforts to boost domestic consumption, resulting in a reduction in the volume of new bank loans issued. Increasing repayment pressure has further weakened the effectiveness of policies aimed at subsidizing loans for big-ticket items such as automobiles, home renovations, and electronics.
Bloomberg pointed out that the surge in China's short-term debt is largely driven by loan platforms operated by tech giants, including mobile payment leader Ant Group and short-video giant ByteDance. These platforms act as intermediaries between banks and borrowers, offering loans with annualized interest rates ranging from 4% to over 24%. Both Ant and ByteDance declined to comment.
According to insiders, regulators have instructed online platforms to cap the average interest rate of new loans at below 20%.