Catenna, Friday, March 14, 2025- China’s financial regulator on Friday ordered banks and other financial institutions to encourage more consumer financing and properly relax consumer credit quotas and loan terms to increase consumer spending in China.
The National Financial Regulatory Administration (NFRA) said banks should lend more and also find ways to help borrowers who run into difficulties, to build more confidence among consumers who are opting to save rather than spend, worried over jobs and the outlook for the economy.
Share prices in China surged following the notice from the NFRA.
Officials are due to hold a briefing on Monday on efforts to increase spending and investment, factors considered crucial for keeping the economy on track following the setbacks of the COVID-19 pandemic, when millions of people lost jobs and many companies went out of business.
The Chinese economy has been growing recently at about a 5% pace, according to official statistics. Spurring reluctant Chinese consumers to spend has been elevated to the top of Beijing’s to-do list for 2025, as lawmakers look to rectify imbalances in the world’s second-largest economy.
A prolonged downturn in the property market triggered by government efforts to rein in excessive borrowing by real estate developers has also weighed on consumer sentiment, leaving many families feeling worse off than in the past.
The level of consumer financing and other personal borrowing in China has tended to be much lower than in the U.S. and many other countries, although it has surged in recent years. Nearly nine in 10 Chinese families own their homes, while fewer than half of homeowners have mortgages
Apart from expanding use of consumer credit, the government is spending tens of billions of dollars on car and appliance trade-in programs meant to encourage use of more energy efficient products, but also to soak up excess inventories due to weak demand.
