China’s Troubled Household Loans Jump More Than a Fifth to 2.22 Trillion Yuan
Key Facts
China’s outstanding nonperforming household loans rose by more than a fifth in 2025 to a record 2.22 trillion yuan, according to estimates by Gavekal Dragonomics cited by Reuters. The increase puts household defaults at the center of pressures on consumer demand as Beijing seeks to boost spending. The firm estimated that as many as one in 10 adults in China fell behind on debt payments during the same year. The two estimates point to a widening problem across the borrower base and the volume of troubled loans, but do not establish how many people face collection action. The indicators come as official price data showed a divergence between consumer inflation and producer prices.
China’s National Bureau of Statistics said the consumer price index rose 0.7% year on year in October 2026, but the pace of increase slowed by 0.2 percentage points from September. On a monthly basis, the index was unchanged, meaning prices did not rise from the previous month. The core index, which excludes food and energy, rose 0.8% year on year, down 0.2 percentage points from the previous month. Food prices fell 2.9% year on year, adding downward pressure to the overall index. By contrast, the industrial producer price index rose 5.7% year on year and 0.7% month on month, moving differently from consumer prices.
Earlier credit data point to caution among households: short-term household loans contracted 7% year on year in June 2026, according to a Reuters report published in July. Weak short-term borrowing coincides with a record level of nonperforming household loans, but on its own does not establish a causal link between declining credit and defaults. An economist at TS Lombard said pushing households to borrow for consumption at lower cost when their incomes are not growing could worsen the problem of late payments. The comment puts the focus on households’ ability to service debt, rather than the cost of credit alone. The available data did not include a documented estimate of the reasons individual borrowers defaulted.
Data from some banks point to pressure in personal and credit card loan portfolios. ICBC’s nonperforming personal consumer loan ratio was about 2.51% at the end of June 2025, up 0.12 percentage points from the end of 2024, according to figures cited by Reuters. The bank’s credit card delinquency rate rose to 3.75% at the end of June, an increase of 0.25 percentage points. Across the sector, transfers of nonperforming personal loans under a program for their transfer and disposal totaled 107.6 billion yuan in the first half of 2025, more than double the level in the same period of 2024. These figures offer indications of how banks are handling troubled loans, alongside the scale of the problem on their balance sheets.
China’s National Financial Regulatory Administration extended a program allowing banks to transfer and dispose of nonperforming personal loans through the end of 2026, after it had been due to expire at the end of 2025, Reuters reported, citing sources. The extension allows the mechanism for handling these loans to continue next year as the outstanding balance of nonperforming household loans reaches a record, according to Gavekal Dragonomics estimates. Transfers under the program were more than double their year-earlier level in the first half of 2025, showing wider use before the extension. A TS Lombard economist said expanding consumer credit to households whose incomes are not growing could worsen late payments. October inflation data, which showed a limited annual increase and no monthly change, remain a parallel economic backdrop to the credit issue.