China is a nation of savers. The Chinese government wants its people to spend more and save less. It also wants them to take on more debt, all for the sake of saving the economy from a four-year slump.
The national financial regulator urged banks in March to expand consumer lending and offer more flexible repayment terms. Last month, policymakers promised to provide “innovative” financial services to boost consumption.
Yet many Chinese consumers are wary. An alarming number of them are already defaulting on their debt.
From 2021 to 2024, China’s total household savings grew 50 percent, as people scared off by a big decline in housing values stuffed their money in banks. During the same period, the number of loans that households could not afford to pay back nearly doubled.
For Beijing, expanding access to credit may seem like a quick way to stimulate the economy. But this push for consumers to borrow risks deepening a growing personal debt crisis. Many borrowers, particularly young people, are caught in cycles of debt, driven by poor financial literacy, high youth unemployment and stagnant wages.
Those caught in the cycle run the gamut: factory workers, young professionals and gig economy workers. They are people who barely make ends meet while living in fear of default, calls from debt collectors and an overwhelming sense of shame.
One person I interviewed, a 27-year-old tech worker in Shanghai, said he often borrowed from one online consumer finance app to repay what he owed to another one. He said the anxiety was overwhelming. “I feel trapped in an endless loop,” he said, asking me to use only his surname, Xia. The other three people I interviewed also asked not to be identified for fear of government retribution.
There is a growing split in China’s economy. The better-offs are saving more for rainy days. The worse-offs have little choice but to take on debt.
A recent quarterly survey by China’s central bank with 20,000 respondents across 50 cities showed that consumers were increasingly pessimistic. Their perception of job security has fallen to record lows. Their willingness to spend has dropped to levels unseen since the height of the Covid-19 pandemic.
Last year, an estimated 25 million to 34 million people defaulted on personal loans, twice the number in 2019, according to Gavekal Dragnomics, a research consultancy. Include loans that were overdue, but not yet in default, and the number of risky borrowers swells to between 61 million and 83 million. That amounts to between 5 percent and 7 percent of the total population 15 and older.
As in the United States, defaults wreck personal credit records in China, locking people out of future borrowing and significantly limiting their upward mobility. But the punitive effect could be aggravated because China lacks a formal bankruptcy system to allow individuals to erase their debts.
For many indebted individuals, taking on more loans is a means of survival, not consumption.
Mr. Xia, the tech professional in Shanghai, said he had begun borrowing small sums through Alipay’s Huabei payments service during college to cover basic expenses. After graduating in 2019, his debt ballooned, peaking at over $7,000, an amount that would be manageable if he had stable employment. But he said he had been unemployed half the time since graduation.
It’s easy to get consumer loans online in China, probably more so than it is in other countries, said Victor Shih, an economist at the University of California, San Diego.
China’s biggest internet platforms, with huge user bases, all have loan portals. They work with state-owned banks, which are eager to lend to consumers since the housing crash ate into their business. Online loans’ interest rates are usually higher than credit cards, and online payments are much more widely used than credit cards in China.
The loan offers are everywhere on the internet. When ordering a takeout meal on a delivery app, users are asked if they want to borrow money to pay for the meal.
Obtaining a loan, Mr. Xia said, often requires providing only basic identity and employment information, and the money is disbursed nearly instantly.
Despite being in debt since 2018, Mr. Xia said he had little knowledge about how interest or credit scores worked. None of the four borrowers I interviewed could tell me the interest rates or service charges on their loans.
But they all said they had anxiety, depression or insomnia. One of them, a 26-year-old meal deliveryman in Chongqing, emailed me at 4 a.m. because he was too stressed to sleep.
Another man, burdened with $220,000 in debt after several business failures and long stretches of unemployment, told me that he had considered jumping off a building. He and his wife, both in their mid-30s, have had nearly no income for the past two years and no luck finding jobs since they have been told they were too old.
The man, whose surname is Shao, said he missed a loan payment on June 10. At 9 a.m. the next day, collectors were calling incessantly.
“The calls are designed to intimidate and insult,” he said. “They want to pressure you into finding a way to repay, whether it’s taking on other loans or borrowing from friends and families.”
He had prepared himself by reading about the experiences of others like him on online forums and speaking to friends who work at debt collection companies. Still, the pressure was unbearable.
Mr. Shao has yet to experience what many consider the worst part: the public shaming. Collectors will start calling family and friends from a borrower’s phone contact list, a tactic banned in principle but still widely used.
Many borrowers feel that shame long before they default on a debt. The societal values are shifting, but older Chinese people who have lived through hard times tend to judge the young harshly.
After listening to my Chinese podcast episode on this topic, a businesswoman sent me a long text message: “Where have our Chinese virtues gone — diligence, frugality, and living within our means?”
But others pushed back on blaming the debtors, arguing that the problem is China’s credit system.
“The lending mechanism is a honey trap,” one podcast listener commented, “designed precisely to catch ordinary people at their weakest moments.”
Another comment, using a Chinese idiom, likened Beijing’s consumer loan push to “drinking poison to quench thirst,” arguing that it does nothing to tackle the underlying causes of weak consumption — economic hardship and an inadequate social safety net — and merely delays the inevitable by encouraging borrowing against the future.
Policymakers have floated proposals like a “credit repair” program to help people who default reclaim access to loans, but analysts say they could take time to establish. Authorities also limit debt collectors to no more than three calls a day per person and prohibit calls during off hours. Still, complaints against debt collectors are soaring, suggesting that enforcement is weak.
And without a personal bankruptcy system in China, there are few ways to discharge debt. Defaulting on a loan can leave a permanent mark.
The feeling of desperation over consumer debt is widespread.
On the video site Bilibili, an account called Quitting Society functions like an online support meeting room for debtors. During livestreaming sessions, the 30-year-old host reads out confessions from people who say they’re addicted to online borrowing. His most important advice: Tell your parents, and seek help immediately.
The account has over one million followers. A hashtag urging all online borrowers to watch the videos has drawn 170 million views and more than 70,000 comments on the social media site Weibo.
Li Yuan writes The New New World column, which focuses on China’s growing influence on the world by examining its businesses, politics and society.
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