As much as 10.6% of China’s 1.1 billion adult population were behind on debt payments at the end of 2025.

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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.

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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.

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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.

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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.

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  • HotznplotznOPEnglish
    4·
    2 days ago

    I don’t know where you’ve got this data. The U.S. Federal Reserve says that in the first quarter 2026, transitions into serious delinquency in the U.S. were mostly unchanged for auto loans and credit cards but accelerated slightly for mortgages (representing the largest share of household debt also in the U.S.), rising from 1.4 percent to 1.5 percent.

    But I don’t think that numbers are comparable, especially not between China and the rest of the world as Beijing’s isn’t very transparent. Most reliable data comes from research organizations as Gavekal Dragonomics cited in the article. In a report from last year, Dragonomics said that the number of people defaulted on their debt in China are now twice as high as they were five years ago, and they were citing high youth unemployment and a property slump as the reason, with no relief in sight.

    In a recent report, Dragonomics says that the average non-performing loan (NPL) ratio for Chinese household loans in 2026 is more than double the rate prior to the pandemic.

    The problem here is - again - that Chinese banks don’t fully disclose all numbers to assess the NPL. One exception is China Merchants Bank, which specializes in household loans: in its annual report, it disclosed RMB62bn of new bad retail loans in 2025, almost double the RMB36bn in 2024.

    Since China Merchants is considered the industry leader in managing consumer lending, other banks are probably seeing similar problems with household debts, according to the researchers. NPL ratios rose for every type of household loan: mortgages, operating loans for small businesses, consumption loans, and credit-card liabilities. This suggests the problem is a general strain on the ability of households to service their debts.

    As Dragonomics writes:

    Such a deterioration in households’ financial situation is the clear consequence of years of weak income growth and a poor labor market.

    Their entire report makes a good and informative read: https://research.gavekal.com/article/consumer-defaults-are-climbing/