China will continue to lead Asia’s retail lending market over next five years, reveals GlobalData

China’s retail lending market, which registered strong growth during 2014–18, will continue to lead the Asian retail lending market with a compound annual growth rate (CAGR) of 13.7% during 2019–23, says GlobalData, a leading data and analytics company.

According to GlobalData’s report, ‘China Retail Banking: Opportunities and Risks to 2023’, China’s total loan balances outstanding recorded a CAGR of 25.2% from CNY15.4 trillion (US$2.2 trillion) in 2014 to CNY37.8 trillion (US$5.5 trillion) in 2018.

The majority of Chinese loan balances outstanding were from home loans, followed by credit card and personal loans.

Ravi Sharma, Senior Analyst at GlobalData, comments: “The availability of easy loan acquisition facilities for even subprime borrowers, coupled with the proliferation of non-bank lenders providing same-day loan approvals and unsecured loans at competitive interest rates, resulted in the rapid increase in household debt between 2014 and 2018.”

Image for publication: Please click here for enlarged chart

Mortgage loans remain the largest category as they increased significantly during 2014–18, recording a CAGR of 24.8%.

Sharma continues: “The Chinese mortgage market has been characterized by growing house prices since 2015. This was further fueled by the relaxation of property investment restrictions, including lower down payment ratios, interest rates and collateral requirements.”

Mortgage loans are followed by credit card balances, which are driven by rising domestic consumption and growing demand for consumer credit (especially among the middle class population).

In addition, China’s gross savings rate stood at 45.7% in December 2018 – one of the highest savings rates in the world – reflecting Chinese consumers’ preference to save rather than spend. This, coupled with a global equity market downturn, led the Chinese retail deposit market to post a healthy CAGR of 9% during the review period.

The trend is expected to continue on account of anticipated economic uncertainty and ongoing trade disputes with the US.

Sharma concludes: “With stringent government regulations aiming to curb rising household debt, the growth in loan balances outstanding is expected to decelerate over the forecast period (2019–23).”

More Media