Banking Authorities Highlight Rising Household Debt Risk

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Senior officials from both the China Banking Regulatory Commission and the Chinese central bank have expressed their concerns about rapidly rising levels of household risk at the sidelines of the 13th National People’s Congress in Beijing.

Guo Shuqing, the chair of CBRC, said that household leverage was fast emerging as a key concern alongside existing government and corporate debt levels.

“There has been rapid growth in household debt [including] borrowing for consumer spending, property acquisitions and investments,” said Guo. “That is very risky.”

Guo said that China would lose the advantages it enjoys as a nation of savers if household debt levels exceed savings.

While the banking regulator does not yet plan to introduce any concrete measures for curbing household debt, Guo did point out that reining in leverage would remain one of the top three priorities for the Xi administration over the next several years, given its critical importance to combating financial risk.

As part of China’s ongoing deleveraging campaign, the banking regulator will continue to target debt in the corporate sector via debt-equity swaps and restructurings.

Pan Gongsheng, deputy governor of the People’s Bank of China, said that the central bank was closely monitoring household debt levels, and focusing in particular upon surging growth in mortgages.

Official data indicates that mortgage loans posted a 22% increase in value last year, as compared to a 12.7% expansion in China’s overall credit.

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