The Chinese Communist Party (CCP) has been encouraging banks to introduce high-value consumer loans ranging from one million to ten million yuan to stimulate domestic consumption. However, experts question the effectiveness of this measure and warn that it may bring more risks of non-performing loans to banks.
In March this year, the CCP’s China Banking and Insurance Regulatory Commission encouraged banks to increase personal consumer lending. Mainland banks subsequently raised consumer loan limits to a maximum of 500,000 yuan and extended loan terms to 7 years.
Recently, the CCP once again pushed for increased consumer loan issuance. According to a report by the “China Business News” on July 25th, banks across China, from state-owned to local banks, have significantly upgraded their consumer loan products. Some consumer loans are secured by real estate with limits as high as 10 million yuan and loan terms extended to 10 years. Some of these products even offer repayment in the form of “interest-only” payments.
“Interest-only” means that borrowers only need to repay the interest each month, with the principal being paid off in a lump sum at the end of the term.
The report mentioned that banks have set high requirements for customers applying for large consumer loans. For example, clients applying for “Jianyi Loan” or “Fangyi Loan” at Construction Bank are required to be on the “whitelist” of national agencies or pay into housing provident funds, or have existing mortgage loans with the bank.
The maximum amount for “Jianyi Loan” is 1 million yuan, with an annual interest rate starting at 3.3% and a term of 5 years. “Fangyi Loan” requires collateral, with a maximum amount of 3 million yuan, an annual interest rate starting at 3%.
Agricultural Bank’s “Wangjie Loan” offers a maximum amount of 1 million yuan, with an annual interest rate starting at 3.1% and a term of 5 years. The “Fangdi e Loan” for individuals has a maximum limit of 10 million yuan with a term of 10 years, while the “Diya e Loan” for business owners also offers a maximum of 10 million yuan. Both “e Loans” require real estate as collateral, and business owners need to show their company’s cash flow situation.
Professor Xie Tian from the University of South Carolina’s Darla Moore School of Business told The Epoch Times that the primary reason for Chinese banks to introduce large consumer loans is due to pressure from the CCP government. This action forces banks to increase lending, boost credit, and attempt to stimulate the economy amid China’s economic downturn.
He added that banks are also using this opportunity to increase loan business and thereby income. However, with low profit margins, he doubts that banks can effectively improve their financial situation through the expansion of consumer loans. The competition among banks for the consumer loan market is intense.
Specialist on Chinese issues, Wang He, pointed out that China’s total household savings exceed 15 trillion yuan, meaning banks have ample funds but struggle to lend them out. In recent years, mainland banks have been focusing on expanding consumer loans, especially now with new policies pushing banks to emphasize personal consumer loans.
However, Wang He believes that the significant increase in consumer loan limits is more a result of pressure from CCP policies rather than banks willingly taking on more risks.
He also questioned whether consumer loans can actually stimulate consumption, as Chinese households tend to save a lot, reflecting a negative response to government and bank demands to invest or spend their savings.
Banks primarily rely on the interest margin between deposits and loans for profits, accounting for over 60% of their earnings. If there is a lack of loan demand, banks will struggle.
“Currently, banks are in a tough situation, facing fierce competition. With the overall economic downturn in China and lack of consumer confidence, consumption remains low,” Wang He said.
Moreover, he warned that a surge in consumer loans may not necessarily benefit the economy as it could pose risks leading to more non-performing loans.
“Most people do not need such large amounts of consumer loans. Those who do likely use them for buying houses, shifting to business loans, or investments. If these investments fail to generate returns, the loans become unpayable,” Wang He explained.
Although high-value loans are secured, ineffective disposal of collateral assets could pose risks to banks.
Wang He mentioned that some individuals may monetize their properties or businesses by obtaining high-value loans and then relinquishing their pledged assets, essentially cashing out.
“Chinese banks have been actively dealing with a large number of non-performing assets related to personal consumer loans. The discounts on these assets are very low, even as low as 0.5%,” Wang He said.
According to reports, China Ping An Bank announced the transfer of its first batch of personal non-performing loans (including personal consumption and business loans) in 2025, with a total unpaid balance of approximately 207 million yuan, starting at 4.22 million yuan, equivalent to an extremely low 0.2%.
“This indicates that the non-performing rate of consumer loans and personal loans is rising across major banks. Therefore, the widespread implementation of high-value consumer loans will undoubtedly entail significant risks,” Wang He emphasized.
Xie Tian also pointed out that with China’s overall economic slowdown, businesses are finding it hard to survive, and many are facing closures. In such circumstances, individuals who have taken out large loans may struggle to repay in the absence of business income.
“In essence, this has brought a new crisis to mainland Chinese banks,” Xie Tian said.