China's debt crisis: 10 crore people struggle to repay loans

Debt collectors are pursuing repayments from an estimated 100 million struggling borrowers in China. The surge is expanding the distressed-debt market while exposing deep household financial pressure.Economic slowdown and job losses drive loan defaultsNew Delhi,Nov 9, 2026 09:08 ISTChina has a debt crisis. Sounds hard to believe, right? The country is known for its manufacturing strength, economic scale and growing number of wealthy entrepreneurs. It is one of the world's biggest economies and a major force in global trade.Yet, amid this economic might, a less visible problem is growing: millions of ordinary Chinese people are struggling to repay their personal loans.As many as 100 million Chinese consumers could be finding it difficult to service their personal debt, according to Bloomberg Businessweek estimates based on research by Gavekal Dragonomics. The problem has become so large that it is also creating a booming market for companies and investors buying unpaid loans and trying to recover the money.The human cost of this growing debt burden is visible in the work of Ryan Hu, a 23-year-old debt collector in Wuhan. He often stays in his office past midnight after making more than 300 phone calls in a day, chasing people who have defaulted on personal loans. The people he contacts reflect the financial pressures facing households across China. They include a restaurant owner whose business never recovered after the Covid-19 pandemic, a couple who lost their jobs during the real estate downturn, and university graduates unable to find work after months of job hunting and struggling to pay rent and daily expenses.Hu says the impact of the economic slowdown is visible in the cases coming to him. "People simply have less capacity to repay than they did before. You can see the impact of the economy directly in the cases coming through," he told Bloomberg Businessweek. He also spoke about the toll the job has taken on him, saying his mental health had deteriorated over the previous six months.CHINA'S BAD-DEBT MARKET GROWS MORE THAN 20 TIMESThe scale of the problem is reflected in China's rapidly expanding market for unpaid consumer loans.When China first allowed banks to package and sell non-performing consumer loans in 2021, around 18.6 billion yuan (about $2.8 billion) worth of such loans were transferred off banks' balance sheets and sold to distressed-asset managers by the end of that year.By the end of 2025, the amount had surged more than 20 times to around 454 billion yuan, according to Ruiunion Credit Platform, a Shenzhen-based company that provides asset valuations.China's bad-debt market largely deals with unsecured consumer loans, including credit-card dues and personal loans. Mortgages and car loans are generally excluded because they are backed by property or vehicles, which give lenders a better chance of recovering their money.The rise in unpaid loans has also changed how banks deal with them. Some banks are now trying to sell such loans every month rather than once a quarter, according to managers familiar with the matter cited in the Bloomberg report.WHY ARE SO MANY PEOPLE STRUGGLING TO REPAY LOANS?The problem is not simply about people borrowing beyond their means. Huang Yuying, 32, who manages a mid-sized debt-collection company in Hefei, told Bloomberg that failed businesses, job losses and sharp drops in income were often behind defaults.China's economic slowdown has weakened household finances, while the property downturn and job losses have made it harder for people to keep up with repayments. Households are also directing more of their income towards servicing debt, while banks are becoming more cautious about extending fresh credit.The situation has become more difficult after China tightened oversight of consumer loans issued through online platforms this year. Regulators told such lenders to keep average interest rates on new loans below 20%, according to people familiar with the matter cited by Bloomberg. This reduced the availability of credit for borrowers who had been using loans from multiple platforms to repay other loans.Official banking data show that less than 3% of household loans are delinquent, below the US delinquency rate of 4.7%. However, these figures may not capture the full extent of household financial stress. Some borrowers manage to keep up with payments by extending loans, refinancing or seeking financial support from family members.China also lacks a nationwide personal bankruptcy framework that would allow individuals to restructure or discharge their debt.UNPAID LOANS BECOME A BUSINESSAs banks look to move overdue loans off their books, a growing number of investors are entering the business of buying and recovering bad debt.Banks and consumer-finance companies typically bundle thousands of overdue credit-card balances and unsecured loans into portfolios. These are then sold through exchanges or state-supervised auctions, often at steep discounts.The market was initially dominated by four state-owned asset-management companies set up in 1999 to deal with bad loans in China's banking system. But the buyer base has expanded since 2021 to include private distressed-debt funds, regional asset managers and non-state financial institutions.The business model is based on buying unpaid loans cheaply and recovering a larger amount from borrowers. Distressed-debt firms typically pay around 6% to 7% of the outstanding loan balance and can recover about 30% of what borrowers owe. The difference offers room for profit after legal and operating expenses, provided borrowers repay.But recovering the money is not easy. Investors depend on debt-collection companies and their employees to persuade people to pay.THE PEOPLE CHASING DEBT ARE UNDER PRESSURE TOOThe growing debt-collection industry has created a difficult working environment for people such as Hu.Huang, the debt-collection manager in Hefei, is one example of how the industry has drawn workers who have themselves experienced economic uncertainty. He previously worked as a programmer at an auto-financing startup, but lost his job when the company collapsed during the pandemic as overdue loans increased. He later moved into debt collection, seeing it as an industry with future opportunities.Debt collectors can make 200 to 300 calls a day, dealing with borrowers who may be apologetic, frustrated or openly hostile. Entry-level workers earn around 4,000 yuan (about $600) a month, while experienced collectors can earn between 20,000 and 30,000 yuan a month.For Li Xingkai, 27, who has worked in debt collection for six years, the job initially meant dealing with insults, threats and abuse from borrowers. He said he gradually learnt to detach himself and now ends calls when they turn abusive.In one case in 2024, Li spent nearly a month pursuing a borrower who had been overdue on payments for almost two years. The borrower initially cursed at him during every conversation, but Li continued explaining the consequences of default and discussing repayment options. Eventually, the borrower agreed to pay back the 30,000-yuan principal, while the interest was waived.However, such outcomes are not guaranteed. Collectors can spend weeks negotiating repayment schedules, only for borrowers to stop responding when payments become due. Huang described the resulting frustration as overwhelming.The emotional toll is reflected in employee turnover, which can reach 20% in some months, according to the report.CHINA TIGHTENS RULES ON DEBT COLLECTIONDebt collection has faced growing scrutiny in China over allegations of intimidation and harassment.Regulations introduced this year prohibit collectors from threatening or humiliating borrowers, using force to recover money, or repeatedly bombarding them with phone calls. Public-security authorities are also examining collection companies' activities.The tighter oversight has led to layoffs at some firms and slowed loan-recovery rates.The problem is also affecting younger people, who are both among those struggling with debt and those working in the collection industry. Youth unemployment in China remained elevated at 18% in September, adding to concerns about job prospects and household finances.For Hu, the experience of dealing with people struggling to repay loans has changed his own approach to money. "The biggest effect this industry has had on me is it's turned me into a penny-pincher," he told Bloomberg Businessweek. "Otherwise, I could easily have ended up on the debt collectors' call list myself."China's growing consumer debt problem is therefore creating pressure well beyond the borrowers themselves. Banks are selling overdue loans, investors are building businesses around recovering them, and debt collectors are dealing with the consequences of an economic slowdown one phone call at a time.- Ends