Reuters: China's Bank Faces Increased Pressure on Consumer Loans, Rising Non-Performing Loan Rates Put It in a Dilemma

Reuters reported on July 11 that Chinese banking institutions are facing dual pressures from regulatory requirements to expand consumer credit disbursement and a sharp increase in personal loan defaults. The growth rate of consumer loans in the first quarter of this year was only 6.1%, significantly slower than 8.7% in the same period in 2024 and 11% in the same period in 2023. Several bank executives revealed that the current non-performing loan (NPL) rate for personal loans is rapidly rising, with an increasing divergence between state-owned major banks and regional banks: the NPL rate for consumer loans at Industrial and Commercial Bank of China rose from 1.34% in 2023 to 2.39% by the end of 2024; Bohai Bank's NPL rate soared from 4.44% to 12.37% during the same period, while Harbin Bank also increased to 5.51%.

Since March this year, regulators have repeatedly required banks to provide lower interest rate loans to stimulate consumption. Some banks once reduced interest rates below 3%, but were forced to adjust due to pressure on profits and bad debt risks. Banks at the grassroots level are caught between lending targets and risk control contradictions. Some branch managers of large state-owned banks frankly said, "In order to complete the target, account managers even borrowed clients from other banks," and the sharp increase in loan defaults has made banks cautious about lending: In the first quarter of this year, the banking industry listed 7.427 billion yuan in non-performing loans for transfer, which surged by 190.5% year-on-year, of which 70% were personal loans.

Weak demand has become another obstacle. A survey by the People's Bank of China on 20,000 households showed that 61.4% of respondents plan to increase savings, which has jumped nearly 20 percentage points compared to before the pandemic. Song Lin, Chief Economist for Greater China at ING, pointed out: "Consumption recovery driven by income growth is more sustainable, but this requires complex reforms such as local governments increasing social welfare spending." Beid, Deputy Director of China Research at Gavekal, pointed out the core contradiction: "The fundamental issue is slowing income growth and family anxiety, not a lack of low-interest loans."

Original article: https://www.toutiao.com/article/1837351199335499/

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