Rising Consumer Defaults Drive China Banks to Increase Bad Loan Sales

Chinese banks are increasing the sale of bad loans at a record pace as regulators push for faster disposal of sour debts amid rising consumer defaults during an ailing post-COVID economic recovery. The issuance of securities backed by non-performing loans (NPLs) is set to jump about 40% from last year to a record high. This week alone, six banks plan to issue $210.49 million worth of asset-backed securities (ABS) based on bad loans. Chinese authorities have blacklisted 8.57 million people who missed payments, up 50% from the beginning of 2020. The booming market for bad loans highlights the challenges facing China's banking sector as it grapples with a real estate crisis, local government debt woes, and rising individual delinquencies.