The People’s Bank of China has published a report highlighting the severity of consumer credit growth among Chinese households, which threatens to exacerbate an already slowing economy if default rates pick up, Caixin reports.
Outstanding short-term consumer loan growth jumped from 19.9% year-on-year at the beginning of 2017 to 40.9% in October, according to the report. During this time, the number of new mid- and long-term consumer loans slowed by around 30%.
The report showed that between 2008 and 2017 China’s household debt-to-GDP ratio rose from 17.9% to 49%, with short-term loans making up a larger and larger share. According to the International Monetary Fund, household debt-to-GDP ratios beyond 30% will inhibit an economy’s growth in the medium term.
The central bank has pointed to inflated property prices as the key cause of the loan surge. “In recent years, the rising cost of purchasing property has dragged on the consumption power of some residents, making them turn to using short-term consumer loans to maintain spending,” the report said.
The report builds on comments made last week by former central bank governor Zhou Xiaochuan, who warned against younger Chinese funding purchases through attractive short-term loans.