Chinese banks are struggling to boost consumer credit due to a surge in defaults and lack of financially stable borrowers. Banks offered low interest rates, but demand remains subdued amid concerns over bad debt and income uncertainty. Wage cuts and U.S. tariffs exacerbate the situation.

Consumer loans grew 6.1% in Q1, slower than previous years. Overall NPL ratio stood at 1.51% in March, with rural banks facing higher ratios. Defaults on personal loans have risen sharply, posing challenges to official efforts to boost consumer lending.

Economists prefer income-driven consumption over debt-driven alternatives for sustainable recovery. Concerns arise over rising non-performing loans in the consumer debt sector. Chinese banks saw a 190.5% increase in NPLs in Q1 compared to 2024, with 70% being personal loans. Major and regional banks struggle with rising NPL ratios.

Consumers’ reluctance to borrow and prioritize savings hinders banks’ efforts, with income growth slowing and households anxious about spending. Banks face challenges in issuing new loans and managing bad debt. A central bank survey shows a significant increase in households intending to save rather than borrow.

Read more at Yahoo Finance: Chinese banks stumble on Beijing’s consumer lending push