Credit Card Defaults Surge, NPL Rates Exceed 4% in Parts of China


Official data points to a surge in credit card operations in China, triggering concerns amongst the authorities over an accompanying rise in defaults and fraud.

Figures released by the China Banking and Insurance Regulatory Commission (CBIRC) on key banking sector regulatory indices indicate that as of the end of Q4 2018 credit card use posted a YoY rise of 25.2%, 13.1 percentage points ahead of average growth in other forms of credit.

Mu Jin (木今), a researcher from 51 Credit Card, said to Yicai that the Chinese government’s efforts to drive consumption as a key support for the economy has spurred demand for credit cards, in tandem with efforts by Chinese banks to digtiize their operations.

The rise in credit card usage has also been accompanied by a sharp increase in default rates.

The 2018 Q3 Payments System Operations Overall Conditions Report (2018年第三季度支付体系运行总体情况) released by the Chinese central bank indicates that as of the end of the third quarter the total amount of credit card debt in arrears for more than half a year was 88.098 billion yuan.

This amount marked an increase of 16.53% compared to the preceding period, as well as accounted for 1.34% of outstanding credit card debt.

According to figures released by China UnionPay the 2018 credit card NPL rate exceeded 4% in multiple parts of China, including Tianjin, Chongqing and Liaoning, while in Sichuan, Beijing and Heilongjiang the credit card NPL rate was close to 4%.

In Guangdong province – which leads China in terms of effective card volume, and Shanghai, which is host to the largest average number of transactions per card, the credit card NPL rate is over 3%, while Jiangxi and Gansu provinces are also seeing rapid increases in their NPL rates.


  1. Credit card defaults should also be viewed for its effect on demand for the products and services. A defaulter faces humiliation and resorts to cost cutting on essentials. His/her early impulsive shopping comes to an end. They invariably learn a lesson and start being thrifty cutting down on all non-essentials. Then the habit remains. Even assuming 5% default of the card users earlier spending Yuan 5,000 a month on non-essentials will result into about USD 168 billion less demand. It will hurt the industry and the service sector very badly. It will result in more dependence on exports. Loss of jobs to lead more credit card defaults. A vicious cycle. China is not US. US prints Dollars (issues treasury bills/Bonds) at will and many buyers globally. Not so for China. A time bomb? The amount is manageable today but may cross the limit if the default rate increases.

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