A sharp rise in Chinese consumers defaulting is the latest in a lengthening list of ailments afflicting the world’s second-largest economy. The number of people blacklisted for missing payments on everything from mortgages to business loans has risen to a record 8.54mn, from 5.7mn in early 2020.
This number still only accounts for about 1 per cent of the working-age population. But the rate of increase shows that even since China rolled back its pandemic lockdown about a year ago, rising financial distress at the individual level is contributing to stiff headwinds that are frustrating a broad recovery in consumer activity. Without energising consumer spending, China may struggle to drive sustainable economic growth — which the IMF is forecasting will slow next year to about 4.6 per cent, from 5.4 per cent this year.
This impact of these defaults is exacerbated by an unsophisticated governance regime in dire need of reform. Under current regulations, blacklisted defaulters are blocked from buying air tickets, making payments through the near-ubiquitous mobile apps Alipay and WeChat Pay, and conducting dozens of other commonplace transactions.