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Business Times
11-07-2025
- Business
- Business Times
Chinese banks stumble on Beijing's consumer lending push
[BEIJING] Chinese banks are struggling to comply with new Beijing guidelines to boost consumer credit as they reel from a surge of defaults on personal loans and have a hard time finding households in good financial shape that want to borrow. Since March, financial regulators have issued multiple directives urging banks to offer more, and cheaper, loans to spur consumption, as part of broader efforts to counter the impact of the trade war with the United States. This prompted banks to market personal loans at record low interest rates below 3 per cent initially, before raising them back amid concerns over shrinking profit margins. Loan managers and bank executives said that they are struggling to raise consumer lending, citing subdued demand, as well as concerns over an already rapidly growing pile of bad household debt and uncertainty over their clients' incomes. Recent wage cuts in the financial industry, manufacturing and the state sector have further dented households' financial health while higher US tariffs are fuelling concerns over jobs and income stability. 'It's very difficult to find borrowers for consumer loans,' said a branch head at a state-owned bank, requesting anonymity due to the sensitivity of the topic. 'Banks are caught between meeting lending targets and controlling bad loans.' BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up 'If defaults rise, branch officers face penalties. Many loan officers borrow from each other's banks to meet lending quotas.' The People's Bank of China and the National Financial Regulatory Administration did not immediately respond to requests for comment. Consumer loans grew 6.1 per cent in the first quarter, slower than the 8.7 per cent in the same period of 2024 and the 11 per cent in January to March 2023, according to the central bank. Data for the second quarter is expected in the coming weeks. The overall non-performing loan (NPL) ratio of China's commercial banks was 1.51 per cent as at the end of March, remaining steady compared to 1.50 per cent at the end of 2024, official data showed. Smaller rural commercial banks posted a higher NPL ratio of 2.86 per cent in the first quarter compared to 1.22 per cent at major state banks. Official data does not disclose the NPL ratio of overall consumer loans, but the bank executives and loan managers told Reuters the defaults on personal lending have risen sharply this year. Bad loans pile up The banks' struggles bode ill for official efforts to boost lending to consumers, seen as a faster alternative to raising household incomes. The latter would require indebted local governments spend more on social welfare and civil servants pay, among other measures. Any debt-driven jolt to consumption is likely to prove 'transitory', said Lynn Song, chief Greater China economist at ING. 'Income growth-driven consumption would be strongly preferable in terms of achieving a more sustainable recovery,' Song said, adding that was a more difficult task for authorities. Economists are not concerned about absolute household debt levels, which are about 60 per cent of economic output in China, compared with about 70 per cent in the US and more than 90 per cent in South Korea. But they worry about how quickly NPLs in the consumer debt sector have been rising. In the first quarter of this year, Chinese banks put up 74.3 billion yuan (S$13 billion) of NPLs for sale, a 190.5 per cent increase from the same period of 2024, data from the Banking Credit Asset Registration and Transfer Center show. About 70 per cent of them were personal loans. 'We have a growing pile of bad loans. For many clients who can't repay, all we can do is negotiate extensions,' said a loan officer at a major state-owned bank. The officer said his bank prioritised writing off NPLs over issuing new loans. The Industrial Commercial Bank of China, the world's largest commercial bank by assets, said its consumer NPL ratio rose to 2.39 per cent at the end of 2024, from 1.34 per cent a year earlier. Smaller, regional lenders are faring much worse. Bohai Bank's consumer NPL ratio jumped to 12.37 per cent in 2024 from 4.44 per cent the previous year. Harbin Bank's rose to 5.51 per cent from 3.94 per cent. 'Clients are in poor operating conditions due to the tariffs war and unable to repay their loans,' said a regional bank manager. Another key challenge for banks is that consumers do not want to borrow. A central bank survey of 20,000 households showed that 61.4 per cent intend to boost savings, an increase of almost 20 percentage points from pre-pandemic levels. 'The fundamental issue is that income growth is slowing and households are anxious, so they are restraining their spending and borrowing,' said Christopher Beddor, deputy director of China research at Gavekal Dragonomics. 'It's not that they can't get a cheap loan.' REUTERS
New Straits Times
11-07-2025
- Business
- New Straits Times
Chinese banks stumble on Beijing's consumer lending push
BEIJING: Chinese banks are struggling to comply with new Beijing guidelines to boost consumer credit as they reel from a surge of defaults on personal loans and have a hard time finding households in good financial shape that want to borrow. Since March, financial regulators have issued multiple directives urging banks to offer more, and cheaper, loans to spur consumption, as part of broader efforts to counter the impact of the trade war with the United States. This prompted banks to market personal loans at record low interest rates below three per cent initially, before raising them back amid concerns over shrinking profit margins. Loan managers and bank executives told Reuters they are struggling to raise consumer lending, citing subdued demand, as well as concerns over an already rapidly growing pile of bad household debt and uncertainty over their clients' incomes. Recent wage cuts in the financial industry, manufacturing and the state sector have further dented households' financial health while higher US tariffs are fuelling concerns over jobs and income stability. ADVERTISING "It's very difficult to find borrowers for consumer loans," said a branch head at a state-owned bank, requesting anonymity due to the sensitivity of the topic. "Banks are caught between meeting lending targets and controlling bad loans." "If defaults rise, branch officers face penalties. Many loan officers borrow from each other's banks to meet lending quotas." The People's Bank of China and the National Financial Regulatory Administration did not immediately respond to requests for comment. Consumer loans grew 6.1 per cent in the first quarter, slower than the 8.7 per cent in the same period of 2024 and the 11 per cent in January–March 2023, according to the central bank. Data for the second quarter is expected in coming weeks. The overall NPL ratio of China's commercial banks was 1.51 per cent as of the end of March, remaining steady compared to 1.50 per cent at the end of 2024, official data showed. Smaller rural commercial banks posted a higher NPL ratio of 2.86 per cent in the first quarter compared to 1.22 per cent at major state banks. Official data does not disclose the NPL ratio of overall consumer loans, but the bank executives and loan managers told Reuters the defaults on personal lending have risen sharply this year. BAD LOANS PILE UP The banks' struggles bode ill for official efforts to boost lending to consumers, seen as a faster alternative to raising household incomes. The latter would require indebted local governments to spend more on social welfare and civil servants' pay, among other measures. Any debt-driven jolt to consumption is likely to prove "transitory", said Lynn Song, chief Greater China economist at ING. "Income growth-driven consumption would be strongly preferable in terms of achieving a more sustainable recovery," Song said, adding that was a more difficult task for authorities. Economists are not concerned about absolute household debt levels, which are about 60 per cent of economic output in China, compared with about 70 per cent in the US and more than 90 per cent in South Korea. But they worry about how quickly non-performing loans (NPLs) in the consumer debt sector have been rising. In the first quarter of this year, Chinese banks put up 74.27 billion yuan (US$10.34 billion) of NPLs for sale, a 190.5 per cent increase from the same period of 2024, data from the Banking Credit Asset Registration and Transfer Center show. About 70 per cent of them were personal loans. "We have a growing pile of bad loans. For many clients who can't repay, all we can do is negotiate extensions," said a loan officer at a major state-owned bank. The officer said his bank prioritised writing off NPLs over issuing new loans. The Industrial Commercial Bank of China, the world's largest commercial bank by assets, said its consumer NPL ratio rose to 2.39 per cent at the end of 2024, from 1.34 per cent a year earlier. Smaller, regional lenders are faring much worse. Bohai Bank's consumer NPL ratio jumped to 12.37 per cent in 2024 from 4.44 per cent the previous year. Harbin Bank's rose to 5.51 per cent from 3.94 per cent. "Clients are in poor operating conditions due to the tariffs war and unable to repay their loans," said a regional bank manager. Another key challenge for banks is that consumers do not want to borrow. A central bank survey of 20,000 households showed that 61.4 per cent intend to boost savings — an increase of almost 20 percentage points from pre-pandemic levels. "The fundamental issue is that income growth is slowing and households are anxious, so they are restraining their spending and borrowing," said Christopher Beddor, deputy director of China research at Gavekal Dragonomics.
Yahoo
11-06-2025
- Business
- Yahoo
China bans banks from luring customers with popular Labubu dolls
Chinese authorities have banned domestic banks from luring customers with gifts including the hugely popular Labubu dolls, amid fierce competition among lenders as interest rates and profit margins decline. The Zhejiang branch of China's financial regulator, the National Financial Regulatory Administration, has asked local banks to refrain from offering non-compliant perks to attract deposits, Bloomberg News reported. The guidance came after the Shenzhen-based Ping An Bank ran a promotion offering Pop Mart's Labubu dolls in several cities to new customers who deposit at least 50,000 yuan (£5,162) for three months. The fluffy dolls with a sharp-toothed grin first came on to the market in 2019 and are mostly sold in 'blind boxes'. They went viral after Lisa from the K-pop band BlackPink was photographed with one attached to her luxury handbag last year, followed by the singer Rihanna. The Labubu dolls are the creation of Kasing Lung, an artist born in Hong Kong and raised in the Netherlands. He was inspired by Nordic mythology when he created his 'Monsters' characters for a series of picture books in 2015, including Labubu. Ping An Bank's promotion offered new customers a choice between a Labubu 3.0 blind box and a gift package. However, the Chinese regulator wants to stop the practice of offering customers gifts, which can also include rice, small home appliances and online memberships, because it is concerned that this will increase costs at banks and hurt their profit margins. Banks' margins are at a record low. China's central bank cut benchmark interest rates last month for the first time since October in an attempt to shield the economy from the impact of Donald Trump's trade war. A few days later, the authorities lowered the ceilings on deposit rates to protect banks' profit margins and discourage savings. Ping An Bank's marketing campaign went viral on the Chinese social media platform Xiaohongshu, also known as RedNote, and drew strong interest from savers, but state media said it was 'not a long-term solution'. Labubu dolls have sold out on Chinese e-commerce sites and Pop Mart's official online channels, according to the news outlet Yicai, owned by the Shanghai Media group. Sign in to access your portfolio
The Star
10-06-2025
- Business
- The Star
China bans bank from luring depositors with popular Labubu dolls
The guidance came in the wake of a promotion by Ping An Bank, which has been offering Labubu collectibles in multiple cities for new depositors. - Photo: EPA-EFE BEIJING: A Chinese lender's stunt to woo depositors with gifts including the wildly popular Labubu dolls has been barred by financial regulators, underscoring the increasingly fraught battle among banks for customers as interest rates and profit margins fall. The Zhejiang branch of the National Financial Regulatory Administration has asked local banks to refrain from giving non-compliant perks to attract deposits, according to people familiar with the matter. The guidance came in the wake of a promotion by Ping An Bank, which has been offering Labubu collectibles – blind box toys endorsed by celebrities including Lisa from the K-pop group Blackpink – in multiple cities for new depositors who can park in 50,000 yuan (S$9,000) for three months. Such a practice, which often involves offering free items like rice or small home appliances, as well as e-gifts such as memberships at internet platforms, was seen as driving up costs at banks and hurting their margins, said the people. While Ping An Bank's marketing campaign went viral on Chinese social media platform Xiaohongshu and sparked strong interest from potential savers, it also drew criticism from state media, which said it was 'not a long-term solution'. Chinese lenders are walking a tightrope as they balance between deposit taking and protecting margins that are now at record-low levels across the sector. The nation's big banks just conducted a new round of deposit rate cuts in May, with smaller peers following suit and pushing term deposit interests down to just a little above 1 per cent. The Zhejiang banking regulator has urged the immediate suspension of any products involved in non-compliant deposit-gathering practices, along with the removal of related promotional materials, the people said. It remains unclear whether the regulator's other local divisions have issued similar guidance. The regulator did not immediately respond to a request for comment. Ping An Bank said the initiative started off as a small-scale project launched by a local branch, declining to comment further. China said in a 2018 rule that commercial banks should not attract deposits through 'inappropriate means' such as giving away physical gifts or returning cash. - Bloomberg
Straits Times
10-06-2025
- Business
- Straits Times
China bans bank from luring depositors with popular Labubu dolls
A Chinese lender's stunt to woo depositors with gifts including the wildly popular Labubu dolls has been barred by financial regulators. PHOTO: EPA-EFE BEIJING – A Chinese lender's stunt to woo depositors with gifts including the wildly popular Labubu dolls has been barred by financial regulators, underscoring the increasingly fraught battle among banks for customers as interest rates and profit margins fall. The Zhejiang branch of the National Financial Regulatory Administration has asked local banks to refrain from giving non-compliant perks to attract deposits, according to people familiar with the matter. The guidance came in the wake of a promotion by Ping An Bank, which has been offering Labubu collectibles – blind box toys endorsed by celebrities including Lisa from the K-pop group Blackpink – in multiple cities for new depositors who can park in 50,000 yuan (S$8,960) for three months. Such a practice, which often involves offering free items like rice or small home appliances, as well as e-gifts such as memberships at Internet platforms, was seen as driving up costs at banks and hurting their margins, said the people. While Ping An Bank's marketing campaign went viral on Chinese social media platform Xiaohongshu and sparked strong interest from potential savers, it also drew criticism from state media which said it was 'not a long-term solution.' Chinese lenders are walking a tightrope as they balance between deposit taking and protecting margins that are now at record-low levels across the sector. The nation's big banks just conducted a new round of deposit rate cuts in May, with smaller peers following suit and pushing term deposit interests down to just a little above 1 per cent. The Zhejiang banking regulator has urged the immediate suspension of any products involved in non-compliant deposit-gathering practices, along with the removal of related promotional materials, the people said. It remains unclear whether the regulator's other local divisions have issued similar guidance. The regulator didn't immediately respond to a request for comment. Ping An Bank said the initiative started off as a small-scale project launched by a local branch, declining to comment further. China said in a 2018 rule that commercial banks shouldn't attract deposits through 'inappropriate means' such as giving away physical gifts or returning cash. BLOOMBERG Join ST's Telegram channel and get the latest breaking news delivered to you.
