China has ordered banks and other financial institutions to encourage more consumer financing and use of credit cards as part of a campaign to get people to spend more.
The order from the country’s financial regulator is part of the ruling Communist Party’s latest push to build more confidence among consumers who are opting to save rather than spend, amid worries over jobs and the economic outlook.
It said banks should lend more and also find ways to help borrowers who run into difficulties. Share prices in China surged following the notice from the National Financial Regulatory Commission.
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 their jobs and many companies went out of business.
The Chinese economy, the world’s second-largest, has been growing recently at about a 5% pace, according to official statistics.
But worries over jobs and the burden of healthcare and education have left many Chinese unwilling to spend much, hobbling a major driver of business activity.
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.
Last year, a surge in exports helped to make up for the persisting weakness in domestic demand, which is fuelled by spending and investment.
But US President Donald Trump’s orders to sharply raise tariffs on imports of Chinese goods may dent exports in coming months, raising risks for many types of businesses.
Apart from expanding use of consumer credit, the government is spending tens of billions of dollars on car and appliance trade-in programmes meant to encourage use of more energy efficient products, but also to soak up excess inventories due to weak demand.
The level of consumer financing and other personal borrowing in China has tended to be much lower than in the US 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.
Use of cash and online apps and other forms of digital payments are more common than use of credit cards.
