China’s consumer borrowing goes into reverse

China is seeking to make consumption a stronger driver of growth. While households are still spending, the latest data shows their borrowing is now in contraction.

Cheaper #mortgages have failed to revive housing credit; this category is shrinking in both absolute terms and as a share of households’ borrowing. But this is no longer just a mortgage story. Non-housing consumer loans are also shrinking. Tighter risk controls and internet-lending regulation could be a factor.

Consumer spending is increasingly being driven by service sectors (such as travel and leisure) rather than goods – a shift that may reduce demand for credit. Stronger household income prospects and confidence, alongside targeted financial support, will be crucial to sustaining domestic demand.