Efforts to accelerate the removal of bad retail loans from China's banking system are running into obstacles, after state regulators began investigating the debt-collection industry that plays a key role in the workout process. A pilot program launched in 2021, in which Chinese banks gradually sell portfolios of defaulted consumer loans at low prices to distressed-asset management companies, has now expanded substantially and drawn in dozens of financial institutions. But a security crackdown driven by official concerns over social stability has forced some debt-resolution firms to lay off staff or shut down. The collection process has slowed and recovery rates have fallen. One debt management and collection firm in Shanghai had to cut nearly 500 employees, leaving about 200 last month. Gavekal Dragonomics estimates that at the end of 2025 as many as 100 million Chinese, roughly one in ten adults, had been at least 2.2 trillion yuan, or 327 billion dollars, in arrears. Industrial and Commercial Bank of China saw its credit-card non-performing loan ratio rise to 5.37% in June from 4.61% at the end of 2025. Data compiled by Bloomberg shows that in the first eight months of 2026, more than 1,000 loan portfolios were put up for sale, covering a combined total of more than 275 billion yuan in overdue debt, but not every lot will sell, and the central platform has stopped disclosing total transaction values.
Industrial and Commercial Bank of China LtdRegulatory crackdown on debt collectors stalls retail NPL resolution, slowing recoveries and leaving ICBC's credit-card NPL ratio up at 5.37%.
