Amidst the Chinese government’s encouragement for financial institutions to increase the issuance of consumer loans, the competitive strategies in Mainland China’s banking industry are quietly shifting. Following the prevalent practice of adjusting interest rates, competing for loan limits has become a crucial tactic for banks to seize the consumer loan market. Personal consumer loans in the million-yuan range have become the new favorite in the market, with some products even reaching up to tens of millions of yuan.
According to the report from “China Business News,” numerous state-owned banks, joint-stock banks, and local banks are upgrading their consumer loan products, offering personal loans with limits exceeding one million yuan. Some products even support a “pay interest first, then principal” repayment method, and loan terms have been extended up to 10 years. Among them, consumer loan limits with property mortgages can reach up to 5 million yuan, while those with personal companies as collateral could go as high as 10 million yuan.
“In the past, when the loan limits for bank consumer loans were not enough, I had to apply with two or three banks simultaneously. Recently, I directly applied for a 1 million yuan consumer loan limit at a state-owned bank, so I no longer need to go through the trouble of finding multiple banks when I urgently need money.” said Sun Yao (pseudonym) from Xicheng District, Beijing.
Sun Yao explained that his main reason for obtaining the loan was for personal financial planning needs. Since most of his funds were tied up in stocks, funds, and other investments which he was unwilling to sell, bank consumer loans with low interest rates and convenient use were perfect to cover daily expenses. He even mentioned that this 1 million yuan limit was kept as a “reserve fund,” where he wouldn’t need to pay interest even if he doesn’t withdraw the money.
Li Ping (pseudonym), the owner of an import-export company in Longgang District, Shenzhen, also felt deeply about this. He admitted that the company faced significant financial pressure in operations, especially with frequent social engagements. Consumer loans effectively alleviated the financial strain. “No company is without financial needs. Whether it’s operational loans or consumer loans, bosses will definitely borrow from banks if they can. It’s just that the type and purpose of the loan are different, but ultimately, it’s debt that needs to be repaid,” Li Ping stated.
In March of this year, the State Council’s General Office of the CPC Central Committee issued the “Special Action Plan to Boost Consumption,” specifically encouraging financial institutions to increase the issuance of personal consumer loans. Subsequently, the China Banking and Insurance Regulatory Commission also released a notice on “Developing Consumer Finance to Boost Consumption,” further loosening consumer loan policies: raising the self-payment limit for personal consumer loans from 300,000 yuan to 500,000 yuan. The loan term for commercial banks catering to personal consumption has been extended from not exceeding 5 years to not exceeding 7 years.
Major banks responded one after another. Construction Bank introduced “Jianyi Dai” (up to 1 million yuan, starting annual rate of 3.3%, 60-month term) and “Fangyi Dai” (up to 3 million yuan, starting annual rate of 3%, mortgage type).
Agricultural Bank’s online credit loan flagship product “Wangjie Dai” increased its maximum limit to 1 million yuan (annual rate as low as 3.1%, 60-month term), and introduced “Fangdi e Dai” (for individual customers, up to 10 million yuan, maximum term of 120 months). It also provided “Didi e Dai” (up to 10 million yuan) for corporate customers.
Postal Savings Bank’s “Youxiang Dai” has a maximum credit limit of 1 million yuan in the credit category and 5 million yuan in the mortgage category.
Apart from large state-owned banks, numerous city commercial banks and rural commercial banks have also introduced high-limit consumer loan products.
A credit department employee of a large state-owned bank revealed that many banks are facing significant pressure in retail business and aim to achieve performance targets through high-limit consumer loans.
Although banks have set various conditions and thresholds for high-limit consumer loans, the risks behind them are still worthy of attention. Industry insiders are generally concerned that under the background of economic downturn and pressure on business operations, these enormous loans named “consumer loans” might be diverted by some borrowers towards real estate, investments, or even business operations, indirectly becoming tools for “operational loans” or “funds arbitrage”.
For example, Sun Yao utilizing the funds to cover daily expenses to avoid selling investments and Li Ping, as a company owner, showcasing the blurred line between consumer loans and business operations and personal investments, hint at the potential risks associated with high-limit consumer loans.