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Sylvia Ma

As China rolls out subsidies for personal consumer loans, covering part of the interest costs, Beijing’s latest effort to spur spending is likely to be tested by a deeply ingrained public attitude: saving.
For many Chinese households, including Mary Lin, a 54-year-old primary school teacher, borrowing to spend remains unimaginable.
“Except for a mortgage, I’ve never taken out a bank loan in my life,” she said.
“Taking out a bank loan to spend isn’t popular for people of our generation, unless it’s for something like buying a home.”
Even for younger people like 25-year-old Sally Wan, debt-fuelled spending remains unattractive – even if she does not rule it out entirely.
Wan, an employee at a consulting firm in Shanghai who earns slightly above 10,000 yuan (US$1,394) a month, said she does not plan to take part in the new consumer loan subsidies scheme – though she previously used China’s massive trade-in programme to buy a computer and headphones.


“Even if I do [borrow], it’s usually through credit cards or Huabei, which let you buy now and pay later without interest,” she said. Huabei is a consumer credit service linked to Alipay.
“I think this policy should be very helpful for people who do need consumer loans, but I wouldn’t take one out just because of it.”
Earlier this week, Beijing rolled out a year-long scheme to subsidise one percentage point of annual interest on consumer loans in a bid to “lower the cost of consumer credit for households and help unlock their spending potential”.
But data from the People’s Bank of China, published Wednesday, shows the scale of the challenge. Household deposits increased 9.66 trillion yuan over the first seven months of the year, while household loans only added 680.7 billion yuan from January to July.
In July alone, household loans dropped 489.3 billion yuan. Morgan Stanley analysts said in a note on Thursday the decline represented “a larger-than-seasonal dip,” attributed to “the temporary suspension of consumption trade-in programmes and a cooling property market”.
Data also suggests that the impact of consumer loan subsidies on overall spending may remain limited. A note from GF Securities on Tuesday pointed out that in the year leading up to June, consumer loans rose by 1.2 trillion yuan, just 2.9 per cent of the 41.3 trillion in total retail sales.
The long-term solution is rebalancing the economy towards consumption, which requires building the social safety net for underprivileged groups
Xu Tianchen, Economist Intelligence Unit
China’s top leadership has made consumption a priority as it navigates external uncertainties heightened by US President Donald Trump’s trade policies along with persistent deflationary pressures. The government has rolled out a 30-point policy package and allocated 300 billion yuan to its consumer goods trade-in programme.
However, China’s national savings as a share of GDP is projected to reach 42.36 per cent in 2025, more than double that of the United States at 17.76 per cent and significantly higher than Japan’s 29.77 per cent, according to the latest World Economic Outlook database released by the International Monetary Fund in April.
Xu Tianchen, senior China economist at the Economist Intelligence Unit, said consumer subsidies might provide temporary stimulus but “won’t work forever because subsidising the purchase of consumer durables will front-load future demand”.
“The long-term solution is rebalancing the economy towards consumption, which requires building the social safety net for underprivileged groups, reforming the tax regime and scaling back unnecessary investment projects.”


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Boosting consumption is a top priority for Beijing, but some habits are hard to break


Boosting consumption is a top priority for Beijing, but some habits are hard to break.
