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Household debt: implications for monetary policy and financial stability



Development of consumer credit in China BIS Papers No 46 51 Development of consumer credit in China Shen Bingxi and Yan Lijuan1 Summary Consumer credit – particularly personal consumer loans such as home mortgages and loans financing purchases of automobiles and large durable goods – has developed at a very rapid pace in China over the past decade. With the deepening reform of the house market beginning in 1998, commercial banks began to extend mortgage loans to individuals seeking to buy their own homes. Mortgage loans are now among the best assets held by China’s commercial banks. However, China’s policymakers and regulators are still facing challenges, including a nascent economy-wide credit information system, financial institutions with varying risk management standards and, in recent years, surging house prices. Therefore, in the context of China’s macroprudential policies, the Chinese regulatory authorities have adopted a series of mortgage-related policies and regulations to mitigate and control credit risks and facilitate the healthy development of housing finance, home ownership and housing markets. Volume of consumer credit China’s consumer finance market is at an early stage of development. Consumer credit is the main financing channel for households. In 2007, total outstanding loans to households increased by RMB 1.2 trillion, representing a year-on-year increase of 30.4%. This represents an acceleration of 9.3 percentage points, or RMB 546.6 billion, from the lending pace of 2006. Consumer loans outstanding, of which 80% were housing loans, increased by RMB 868.6 billion during 2007, compared with 2006. Outstanding business-related loans to the household sector increased by RMB 311.1 billion over the levels at the end of 2006.2 With the rapid development of the Chinese economy and the deepening reform of the financial system since 1998, the household lending market, especially consumer loans, has grown sharply. By the end of 2007, o

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