Consumers who opted for debts in China are finding it difficult to repay their obligations.
A report claimed that there are increased consumer default rates since the pandemic and that the lenders' policies would depend upon government efforts for the economy to recover. The scope of the said debt plans was deemed immense in solving household debt-to-GDP (gross domestic product) ratios.
Employers have been laying off employees due to plunging demand for consumer products and services. One of the laid-off employees is Zhang Chunzi who borrowed money from a financial institution, is challenged in finding a solution to settle her obligations.
The report claimed that companies in Huangzhou, one of China's most prominent cities, have been laying off its workers due to disruptions in global supply chains and plunging demand. The result of these economic declines has depleted their revenues rendering them incapable to shoulder employment expenses for all its existing employees.
Early economic indicators of the country also point to similar troubles. Overdue credit card debts have swelled since February, a 50 percent increase from 2019 values. According to two executives working in Chinese banks, online lender delinquency ratios have jumped up to 20 percent since February while there was a 13 percent increase since 2019.
China's Merchants Bank Co., one of the country's consumer credit providers, also revealed that it has suspended its credit card business after incurring significant increases in consumer debt defaults. The report revealed that the primary reason for the defaults was due to the losses of jobs of its borrowers. About eight million of them lost their employment in February.
According to a research fellow at the Peterson Institute for International Economics in Washington, the economic issues that China is experiencing are what global economies should expect for the rest of the year.
It was then revealed that household debt-to-GDP in Nigeria, France, Switzerland, and New Zealand has also been declining. Australia was found to be the top in the number of highest household debt levels among G20 countries. Last Thursday, its financial assistance lines have reported eight times increase in its normal call volume.
According to a report in January from the Institute of International Finance, a similar surge in queries have experienced in the US. Credit balances swelled by 930 million USD in 2019 alone while 3.2 million people filed for jobless benefits since March 21, 2020. The yield was found to be quadruple form the values incurred in 2019.
