Credit card defaults rise 14%
By Zhang Fengming |
May 20, 2010, Thursday
|
Print Edition
Print Edition
CREDIT card defaults in China rose 14.4 percent in the first quarter of this year as the plastic becomes increasingly popular for consumers to use, the central bank said yesterday.
The value of outstanding defaults of more than six months surged to 8.8 billion yuan (US$1.3 billion) at the end of March, the People's Bank of China said yesterday on its Website.
"Bad loan risks on credit card are rising on the growing defaults," the PBOC said.
In China, defaults accounted for 3.5 percent of total outstanding lending on credit cards, up 0.4 percentage point from a quarter ago.
"The default rate is rising, but it's still within control," said an industry watcher declined to be named.
In the United States, the birthplace of credit cards, a default rate of 4.5 percent is generally acceptable. But during the peak of the global financial crisis, default rate in the US increased to about 10 percent.
The combined line of credit available on credit cards in China rose an annual 42.9 percent to 1.48 trillion yuan by the end of March, while outstanding credit jumped 50 percent from a year ago to 248.6 billion yuan.
"When banks accelerate their issuing of credit cards, it doesn't come as a surprise to see rising defaults," said She Minhua, a Haitong Securities analyst.
China is encouraging non-cash payment options such as plastic to boost domestic consumption and curb tax evasion. Credit cards are seen to be the second most lucrative retail credit business for lenders by 2013 after individual mortgages, said McKinsey & Co in an earlier report.
"Bank card consumption has been a driver to boost domestic demand as the cards are gaining popularity among the public," the PBOC said.
Banks in China have issued more than 2.2 billion bank cards to their customers, including credit and debit cards, a jump of 14.9 percent from a year ago. More than 1.67 million merchants are equipped with bank card payment machines by the end of March, an annual growth of 7 percent.
The value of outstanding defaults of more than six months surged to 8.8 billion yuan (US$1.3 billion) at the end of March, the People's Bank of China said yesterday on its Website.
"Bad loan risks on credit card are rising on the growing defaults," the PBOC said.
In China, defaults accounted for 3.5 percent of total outstanding lending on credit cards, up 0.4 percentage point from a quarter ago.
"The default rate is rising, but it's still within control," said an industry watcher declined to be named.
In the United States, the birthplace of credit cards, a default rate of 4.5 percent is generally acceptable. But during the peak of the global financial crisis, default rate in the US increased to about 10 percent.
The combined line of credit available on credit cards in China rose an annual 42.9 percent to 1.48 trillion yuan by the end of March, while outstanding credit jumped 50 percent from a year ago to 248.6 billion yuan.
"When banks accelerate their issuing of credit cards, it doesn't come as a surprise to see rising defaults," said She Minhua, a Haitong Securities analyst.
China is encouraging non-cash payment options such as plastic to boost domestic consumption and curb tax evasion. Credit cards are seen to be the second most lucrative retail credit business for lenders by 2013 after individual mortgages, said McKinsey & Co in an earlier report.
"Bank card consumption has been a driver to boost domestic demand as the cards are gaining popularity among the public," the PBOC said.
Banks in China have issued more than 2.2 billion bank cards to their customers, including credit and debit cards, a jump of 14.9 percent from a year ago. More than 1.67 million merchants are equipped with bank card payment machines by the end of March, an annual growth of 7 percent.
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