Record default rate hit by Chinese borrowers

The news: Over 8 million borrowers have been blacklisted by Chinese authorities after missing payments on loans and/or mortgages, reaching a record high since the Covid-19 outbreak.

The numbers: The Financial Times reports that the 8.54 million people, largely aged between 18 and 59, is up approximately 50% compared to the figure at the outset of 2020 (5.7 million). The current figure accounts for roughly 1% of working-age Chinese adults.

The context: China is experiencing significant economic stress, with consumer spending struggling to regain its pre-Covid-19 power as global demand for Chinese goods slumps and the country’s real estate turmoil continues to drag on its economic performance. Defaults are particularly detrimental to Chinese consumers as authorities can blacklist defaulters, barring access to ubiquitous payment apps such as WeChat Pay or Alipay among other financial penalties.

According to a former Chinese central banker, Reuters reports that China is likely to implement proactive fiscal policy in 2024 in efforts to achieve stable growth.