Summary：China’s soaring consumer defaults threaten Beijing’s efforts to revive spending Banks balk at Beiji

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China’s soaring consumer defaults threaten Beijing’s efforts to revive spending
Banks balk at Beijing's push for more lending amid rising bad loans. Read more at straitstimes.com. Read more at straitstimes.com.

**Introduction**
China’s policymakers have been urging banks to loosen credit in order to spark household consumption, a cornerstone of the post‑pandemic recovery plan. Yet a sharp rise in consumer loan defaults is forcing lenders to pull back, creating a tug‑of‑war between stimulus goals and financial stability.

**Key Developments**
In the first nine months of 2024, non‑performing consumer loans climbed to 2.4 % of total retail credit, up from 1.6 % a year earlier, according to the People’s Bank of China. Major state‑owned lenders such as Industrial and Commercial Bank of China and China Construction Bank reported a 12 % quarter‑over‑quarter increase in overdue credit‑card balances. In response, several banks have tightened underwriting standards, raised interest rates on unsecured loans, and slowed the approval of new personal‑credit lines. The move comes despite a recent directive from the State Council encouraging financial institutions to expand lending to support retail sales, which have lagged below pre‑COVID levels for three consecutive quarters.

**Industry Analysis**
Analysts say the divergence reflects a growing mismatch between policy intent and on‑the‑ground risk appetite. Household debt‑to‑GDP ratio has edged above 60 %, and rising unemployment in urban service sectors has weakened borrowers’ repayment capacity. While the government’s stimulus package includes subsidies for big‑ticket items like automobiles and appliances, banks fear that extending more credit could exacerbate asset‑quality deterioration, potentially triggering broader systemic concerns. Credit‑rating agencies have warned that if the default trend continues, the overall cost of funding for Chinese banks could rise, squeezing net interest margins and limiting their