China’s economy is teetering once again as a series of shocks to the economy and long-term issues are hitting Beijing hard.
Defaults by Chinese borrowers have surged to an unprecedented level since the Covid pandemic as the country faces huge economic challenges.
Official records now show a staggering 8.54 million people in China, primarily between the ages of 18 and 59, are officially blacklisted for missing payments on various financial obligations, ranging from home mortgages to business loans.
The surge in defaults, equivalent to about one per cent of working-age Chinese adults, poses a considerable risk to the world economy.
The economic strain is also visible in the surge of household debt, which almost doubled over the past decade to 64 percent of the Gross Domestic Product (GDP) in September. Wage growth has either stalled or turned negative amid the economic downturn, making financial obligations increasingly challenging for many Chinese consumers.
Financial institutions are also feeling the pressure, with China Merchants Bank reporting a 26 percent increase in bad loans from credit card payments that were 90 days overdue in 2022 compared to the previous year.