China's Busy Consumers Flock to Easier Credit

When Xiao Yang ran a little short of cash to make the mortgage payments on her new apartment, the option that seemed best to her – take out another bank loan to buffer the difference.

She had her 24-year-old son do just that. She is confident they will repay both loans, once she collects the money her sister owes her from a while back.

It’s a tale that would make a credit counselor’s head spin in the Western world, but a scenario that is becoming increasingly common here as Chinese consumers, lured by the glitter of material wealth, take on previously unseen debt.

China is still largely a nation of savers. But that is beginning to change as the country’s banks are rushing to expand consumer credit options. While the loosening of credit could be a boon for banks and a ladder up for consumers, analysts are concerned the pace of change might saddle China’s troubled banking system with more bad loans and leave inexperienced borrowers over their heads in debt.

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