Chinese banks stumble on the batch of consumer lending in Beijing

BEIJING (Reuters) -China banks are struggling to comply with Beijing’s new guidelines to enhance consumer credit because they are craving from increasing assumptions on personal loans and having difficulty finding families in a good financial form that want to borrow.

Since March, financial organizers have issued multiple directions urging banks to provide more, cheaper, loans to stimulate consumption, as part of the broader efforts to face the impact of the trade war with the United States.

These banks prompted marketing personal loans at low interest rates less than 3 % at first, before returning them amid concerns about the shrinking of profit margins.

Bank managers and executives told Reuters that they are struggling to raise consumer lending, referring to the submitted demand, as well as concerns about an already increasing pile of poor living families and uncertainty about the income of their customers.

Recent wage discounts in the financial industry, manufacturing and state sector have continued more financial health for families, while the customs tariff in the United States supports concerns about jobs and income stability.

“It is extremely difficult to find borrowers for consumer loans,” said the head of the branch in a state -owned bank, asking not to be identified due to the sensitivity of the topic. “The banks are arrested between meeting the targets of lending and controlling bad loans.”

“If the failure to pay, the branch officers face penalties. Many loan officers borrow from each other’s banks to meet the lending shares.”

The People’s Bank in China and the National Financial Administration did not immediately respond to the requests for comment.

Consumer loans grew 6.1 % in the first quarter, slower than 8.7 % in the same period than 2024 and 11 % in January to March 2023, according to the Central Bank. The second quarter data is expected in the coming weeks.

The total NPL rate of commercial banks in China was 1.51 % as of the end of March, as it remained fixed compared to 1.50 % at the end of 2024. The smaller commercial banks in the countryside recorded a higher rate than NPL by 2.86 % in the first quarter compared to 1.22 % in major government banks.

Official data does not reveal the NPL ratio of the total consumer loans, but the executives of the bankers and loan managers told Reuters that the default settings on personal lending have risen sharply this year.

Bad loans accumulate from bank conflicts that define the official efforts to increase lending to consumers, which are seen as a faster alternative to raising the family’s income. The latter will require more debt local governments on social welfare and pushing civil service employees, among other measures.