Illustration: On March 14, 2011, employees of an Industrial and Commercial Bank of China (ICBC) branch in Huaibei City, Anhui Province, are seen handling cash. (VCG/Getty Images)
[People News] A recent Bloomberg report has struck like a thunderclap, exposing the reality of consumption in China. By 2025, non-residential household bad debt in China, which includes consumer loans and credit cards, is projected to soar by 21% year-on-year, reaching at least 2.22 trillion yuan, or approximately 329 billion US dollars! This debt crisis directly affects 100 million consumers, representing about 10.6% of China's adult population. Estimates from the Financial Research Institute of Zhejiang University suggest that financial institutions may need to manage 2-3 trillion yuan in personal bad debt annually.
This indicates that among every 10 adults around you, 1 may be struggling to repay debts. Notably, this situation does not pertain to mortgage loans but rather to small consumer loans, meaning that even small loans have 1 in 10 adults unable to repay. The era of carefree credit card spending and borrowing without financial concern is now a thing of the past.
Consumers are increasingly hesitant to spend, and bank loan issuance data is becoming increasingly erratic. The domestic economic demand is not merely stifled; it is fundamentally suffering from severe heart failure due to a lack of sufficient financial support. This 2.2 trillion yuan in bad loans is just a symptom of weak consumption, reflecting a deeper structural crisis within the Chinese economy.
This situation highlights systemic issues related to the debt burden on Chinese households and the rising rate of bad consumer loans. This trend is further corroborated by evidence of accelerated disposal of non-performing assets in the banking sector from 2025-2026 and the list of individuals subject to enforcement for dishonesty.
In early 2025-2026, several banks, including China Construction Bank (Jianhang), Industrial Bank Consumer Finance (Xingye), China Post Consumer Finance (Zhongyou), and Bank of China Consumer Finance (Zhongyin), listed a significant number of personal consumption loan and credit card non-performing asset packages on the Credit Registration Center. The scale of personal non-performing loan transfers saw a substantial year-on-year increase of 85%, with the share of credit cards and consumption loans rising notably to approximately 32% and 38% respectively in 2025. Some asset packages were offered at extremely low discount rates, with some as low as 0.2%, and the size of individual packages reached hundreds of millions to tens of billions of RMB. There were over a hundred projects for the transfer of consumer finance companies listed, with the pace of disposal accelerating, and the trend of 'selling without litigation' becoming increasingly common.
Public data indicates that in recent years, the number of individuals on the Chinese Communist Party's (CCP) court's blacklist of dishonest individuals has approached ten million. At the start of 2020, the list of individuals subject to enforcement by the court was around 5.7 million, which grew to approximately 8.45 million by September 2024, representing about 1% of the labor force. According to official CCP data, the central bank's credit reporting system includes a vast number of natural persons, with around 800 million to 1.16 billion individuals having credit records as of 2024-2025. Regarding the number of individuals with bad credit records, the official total has not been precisely disclosed in real-time; however, some representatives of the National People's Congress have noted that since 2023, tens of millions of individuals have had bad records, while Bloomberg has reported that the number of individuals with bad consumption records has reached 100 million.
Bloomberg reports that the sharp increase in bad debts for consumer loans is closely aligned with macro consumption indicators. In 2025, the total retail sales of consumer goods (社零) surpassed 50 trillion yuan, reflecting a year-on-year growth of only 3.7%. This growth rate is historically low for the past decade and is noticeably weaker than pre-pandemic levels. As we move into 2026, the consumption data indicates an even more challenging situation, with a cumulative growth of just 1.4% from January to May, and a year-on-year decline of 0.6% in May alone, which is a rare occurrence of negative growth in recent years. While retail sales of consumer goods, excluding automobiles, experienced slight positive growth, the overall momentum is severely lacking.
Examining the situation by category reveals even more serious issues. The performance of major discretionary consumption is bleak: retail sales of durable goods such as automobiles, home appliances, furniture, and gold and silver jewelry are underperforming. Although the trade-in policy has spurred some demand, leading to a growth of about 4.1% in related product retail sales in 2025, the marginal impact is diminishing. Service consumption, on the other hand, remains relatively strong, with retail sales in the service sector growing by approximately 5.5% in 2025, but it is insufficient to fully bridge the substantial gap in goods consumption.
An analysis of residents' income and expenditure data reveals a troubling picture. In 2025, the national per capita disposable income is expected to reach 43,377 yuan, reflecting a nominal and real growth of 5.0%. Per capita consumption expenditure is projected at 29,476 yuan, with both nominal and real growth at 4.4%. Urban residents are expected to have a per capita consumption expenditure of 35,869 yuan, an increase of 3.8%, while rural residents will see a figure of 20,259 yuan, marking a 5.1% increase. While these figures may seem reasonable, the proportion of Chinese residents' consumption expenditure to GDP has consistently lingered around 39-40%, projected to be approximately 39.9% in 2025. This is significantly lower than the average of 60-70% in developed countries and below the benchmark of about 55% in middle-income countries worldwide.
Additional macroeconomic indicators further corroborate that the Chinese economy is facing serious challenges. The Consumer Price Index (CPI) has remained persistently low, highlighting significant pressure from weak demand and clear signs of deflation; the trade surplus continues to grow, illustrating a typical structural issue of 'strong external demand, weak internal demand'; the youth unemployment rate (ages 16-24, excluding students) has fluctuated above 16% for years, peaking at 16.9% in March, while the actual unemployment rate could be as high as 50%, not accounting for the 300 million migrant workers.
These data points create a narrative that clearly illustrates the current economic downturn: overcapacity in factories, accumulation of unsold goods; the public is reluctant to spend, showing a much stronger inclination to save rather than consume, keeping their wallets tightly shut; without consumer spending, companies struggle to sell their products, leading to layoffs and salary reductions in factories, tightening the job market further, shrinking residents' incomes, and making people even less inclined to spend.
On June 18, the Chinese Communist Party's Qiushi Journal published a commentary titled 'Boosting Consumption with Greater Efforts.' The article awkwardly acknowledged the slowdown in consumption growth, attributing it to a phase adjustment following the concentrated effects of previous consumption promotion policies and the high temperatures and heavy rainfall in some regions in May, which disrupted residents' offline spending.
The article also recognized the multiple compounding factors contributing to weak consumption: residents are facing significant pressure regarding employment and income, particularly in the context of economic transformation and upgrading, as well as the rapid advancement of new technologies like artificial intelligence. This has led to a pessimistic outlook for future employment and income among workers. Additionally, the relatively inadequate provision of high-level social security and public services has increased the motivation for precautionary savings, thereby suppressing the willingness to spend.
The article called for a strong effort to boost consumption both now and in the future, stating, 'Focus on key areas and adopt multiple measures to promote the continuous expansion of consumption.' 'Let consumers be able to spend, dare to spend, and be willing to spend.' However, despite the numerous slogans, there is much talk but little action, with no tangible financial commitments in sight.
Even more absurd is that the Communist Party is aware of the underlying issues yet continues to prescribe the wrong solutions. On June 20, the Ministry of Commerce and four other departments jointly issued a notice to launch the 2026 New Energy Vehicle Rural Promotion Campaign, introducing over 155 compliant vehicle models for rural areas to choose from. Furthermore, AI technology is playing a significant role in this rural promotion process through intelligent sales assistance, agricultural tourism route planning, and autonomous driving testing.
Simultaneously, the Ministry of Commerce of China, along with eight other departments, has explicitly proposed to effectively implement the fiscal subsidy policy for personal consumption loans. This initiative aims to encourage consumers to purchase AI-related products, including new generation AI mobile phones, AI PCs, smart home devices, and wearable technology.
As the public's financial situation worsens, the Communist Party of China (CPC) becomes increasingly eager to devise major strategies to extract wealth from the populace. When consumption issues arise, rather than focusing on increasing residents' incomes, the CPC continues to push from the supply side, enticing the public to spend. The CPC remains indifferent to market signals, maintaining a government-led economic approach that leads nowhere. Nearly all of the CPC's stimulus policies merely address superficial issues, treating symptoms rather than root causes, and often reversing priorities. This economic development model is inevitably headed for failure.
(First published in People News) △
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