China’s debt crisis: Debt collectors are chasing 10 crore people who can’t repay loans

China is facing growing pressure from a consumer debt problem as millions of households struggle to repay personal loans amid an economic slowdown, job losses and the prolonged property market downturn. An estimated 100 million Chinese consumers could be finding it difficult to service their personal debt, highlighting the financial challenges facing ordinary households in one of the world’s largest economies.

The situation is also creating a rapidly expanding market for distressed consumer debt. Banks are selling unpaid loans to asset managers and private investors, while debt-collection companies are building businesses around recovering money from borrowers who have fallen behind on repayments.

According to estimates by Bloomberg Businessweek based on research from Gavekal Dragonomics, the scale of consumer debt distress has become significant. The growing problem is exposing weaknesses in household finances despite China’s manufacturing strength and position as a major global economic power.

Key Highlights

• An estimated 100 million Chinese consumers may be struggling to repay personal loans.
• China’s distressed consumer loan market expanded from 18.6 billion yuan in 2021 to around 454 billion yuan by the end of 2025.
• Job losses, business failures, falling incomes and the property downturn are contributing to repayment difficulties.
• Investors are buying overdue unsecured loans at steep discounts and attempting to recover money from borrowers.
• China has tightened debt-collection rules amid concerns about harassment, intimidation and pressure on borrowers.

China’s Consumer Debt Crisis Exposes Household Financial Pressure

China is widely recognised for its manufacturing capacity, export strength and large economy. However, behind this economic scale, a growing number of households are facing difficulties managing personal debt.

The financial pressure is particularly visible among people who have lost jobs, experienced falling incomes or struggled to keep businesses running. For many borrowers, missed repayments are not simply the result of excessive spending but reflect a deterioration in their ability to earn and manage regular expenses.

The experience of Ryan Hu, a 23-year-old debt collector in Wuhan, illustrates the human impact of the problem. He often works past midnight after making more than 300 calls in a day to people who have defaulted on personal loans.

His calls reach borrowers from different economic backgrounds. They include restaurant owners whose businesses failed to recover after the COVID-19 pandemic, couples who lost jobs during the real estate downturn and university graduates who cannot find employment despite months of searching.

These borrowers are struggling with loan repayments alongside everyday expenses such as rent and household costs. Hu told Bloomberg Businessweek that the economic slowdown was clearly visible in the cases reaching his office because people had less capacity to repay their debts.

He also described the psychological pressure of the job, saying his mental health had deteriorated over the previous six months.

China’s Bad-Debt Market Grows More Than 20 Times

The expansion of China’s distressed consumer debt market shows how widespread repayment difficulties have become.

China first allowed banks to package and sell non-performing consumer loans in 2021. By the end of that year, approximately 18.6 billion yuan, equivalent to around $2.8 billion, worth of such loans had been transferred from bank balance sheets to distressed-asset managers.

By the end of 2025, the value had increased more than 20 times to approximately 454 billion yuan, according to Ruiunion Credit Platform, a Shenzhen-based company specialising in asset valuations.

The market mainly involves unsecured consumer debt, including credit-card balances and personal loans. These loans are different from mortgages and car loans, which are generally backed by property or vehicles that lenders may be able to recover if borrowers default.

Unsecured loans are more difficult to recover because lenders do not have the same type of collateral. As a result, banks often sell overdue loan portfolios at significant discounts rather than continue holding them on their balance sheets.

The growing supply of unpaid loans has also changed Banking practices. Managers familiar with the matter told Bloomberg that some banks are now attempting to sell overdue loans every month instead of following the earlier quarterly approach.

Why Are So Many Chinese Borrowers Unable to Repay Loans?

Several economic factors are contributing to China’s consumer debt difficulties. The slowdown in economic activity, the property market downturn and employment uncertainty have weakened the financial position of many households.

1. Job Losses and Falling Household Income

Unemployment and reduced earnings have made it harder for borrowers to meet monthly repayment obligations. People who previously had stable jobs may find themselves unable to maintain loan payments after losing employment or accepting lower-paying work.

University graduates are also facing difficulties entering the job market. Some have spent months searching for employment while continuing to pay rent and cover other living expenses.

2. Business Failures After the Pandemic

Small businesses, including restaurants, have also experienced financial pressure. Some businesses failed to recover fully after the COVID-19 pandemic, leaving owners with outstanding loans but insufficient income to repay them.

When business revenue falls, owners may struggle to meet both business-related obligations and personal financial commitments.

3. China’s Property Market Downturn

The real estate downturn has added another layer of uncertainty to household finances. Job losses and weaker economic activity connected to the property sector have affected workers and families who depend on the industry.

Falling confidence and financial uncertainty can also encourage households to reduce spending, making it harder for businesses to recover and support employment.

4. Borrowers Using Multiple Loans to Repay Existing Debt

Some borrowers have relied on loans from multiple online platforms to repay earlier debts. This can create a cycle in which people take out fresh credit to meet existing repayment obligations.

Such arrangements may provide temporary relief but can increase financial pressure when borrowers eventually lose access to additional credit.

Stricter Consumer Loan Rules Add to Borrower Pressure

China has tightened oversight of consumer loans issued through online lending platforms. According to people familiar with the matter cited by Bloomberg, regulators instructed such lenders to keep average interest rates on new loans below 20%.

The tighter rules have reduced the availability of credit for some borrowers who previously depended on multiple online platforms to manage their existing debt.

While stronger regulation can help address expensive lending practices, it may also expose the financial difficulties of borrowers who were relying on fresh loans to avoid missing payments.

The situation highlights the risks of a borrowing cycle in which households depend on new credit to repay older obligations. Once access to additional loans becomes restricted, the underlying repayment problem can become more visible.

Official Loan Default Figures May Not Show the Full Problem

Official banking data indicate that less than 3% of household loans in China are delinquent, compared with a reported delinquency rate of 4.7% in the United States.

However, these figures may not fully reflect the financial pressure experienced by Chinese households. Some borrowers continue making payments by extending existing loans, refinancing their obligations or seeking financial assistance from relatives.

As a result, a borrower may remain current on a loan even while experiencing serious financial difficulties. The use of additional borrowing or family support can delay the appearance of default in official figures without necessarily resolving the underlying problem.

China also lacks a nationwide personal bankruptcy framework that would allow individuals to restructure or discharge their debts through a comprehensive system. This can leave financially distressed borrowers with limited formal options when they cannot meet their repayment obligations.

Unpaid Consumer Loans Become a Growing Investment Business

As banks look to remove overdue loans from their balance sheets, distressed-debt investors are finding opportunities in China’s expanding non-performing loan market.

Banks and consumer-finance companies typically combine thousands of overdue credit-card balances and unsecured personal loans into portfolios. These portfolios are then sold through exchanges or state-supervised auctions, often at substantial discounts.

The market was initially dominated by four state-owned asset-management companies established in 1999 to handle bad loans in China’s banking system. Since 2021, however, the number of potential buyers has expanded to include private distressed-debt funds, regional asset managers and non-state financial institutions.

How Investors Make Money From Bad Loans

The business model is based on purchasing unpaid loans for a small percentage of their outstanding value and recovering a larger amount from borrowers.

According to the report, distressed-debt firms typically pay around 6% to 7% of the outstanding loan balance. They may recover approximately 30% of what borrowers owe, creating a potential margin between the purchase price and recovered amount.

However, this difference is not guaranteed profit. Investors must account for operating expenses, legal costs, collection efforts and the possibility that borrowers will not repay their outstanding obligations.

Recovering money from financially distressed households can be difficult, particularly when borrowers have lost their jobs or experienced a substantial reduction in income.

Debt Collectors Are Facing Pressure Along With Borrowers

The expansion of China’s bad-debt market has created greater demand for debt-collection workers. However, the job can involve long working hours, repeated phone calls and emotionally difficult conversations.

Collectors may contact hundreds of borrowers daily, dealing with people who are apologetic, frustrated or openly hostile. The work requires them to negotiate repayment arrangements while handling repeated rejection and sometimes abusive responses.

Huang Yuying, who manages a mid-sized debt-collection company in Hefei, represents another side of the industry’s growth. He previously worked as a programmer at an auto-financing startup but lost his job after the company collapsed during the pandemic as overdue loans increased.

He later moved into debt collection, viewing the industry as an area with future business opportunities.

Debt Collection Salaries and Employee Turnover

According to the report, entry-level debt collectors in China earn around 4,000 yuan, or approximately $600, per month. Experienced workers can earn between 20,000 and 30,000 yuan monthly.

However, the higher earning potential comes with considerable pressure. Employee turnover can reach 20% in some months, reflecting the difficult nature of the work.

Li Xingkai, a 27-year-old collector who has worked in the industry for six years, said he initially struggled with insults, threats and abuse from borrowers. Over time, he learned to avoid continuing conversations when callers became abusive.

One case in 2024 demonstrated how repayment negotiations can sometimes produce results. Li spent nearly a month contacting a borrower who had been overdue for almost two years. After repeated discussions about the consequences of default and possible repayment arrangements, the borrower agreed to repay the 30,000-yuan principal, while the interest was waived.

However, such outcomes are not guaranteed. Collectors may spend weeks negotiating repayment schedules only for borrowers to stop responding when payments become due. Huang described the resulting frustration as overwhelming.

China Tightens Rules to Prevent Debt Collection Harassment

Debt-collection practices have faced increasing scrutiny in China following allegations of intimidation and harassment. Regulators have introduced stricter requirements to prevent collection companies from using abusive methods to recover unpaid money.

Rules introduced this year prohibit collectors from threatening or humiliating borrowers, using force or repeatedly bombarding them with phone calls. Public-security authorities are also examining the activities of debt-collection companies.

The tighter oversight has affected the industry. Some collection companies have responded with layoffs, while stricter operating conditions have slowed loan-recovery rates.

The regulatory challenge is to allow legitimate recovery of unpaid debt while protecting borrowers from harassment. This is particularly important when people are already facing financial hardship because of unemployment, business failures or falling household income.

Young People Face Pressure From Debt and Unemployment

China’s consumer debt problem is also affecting younger generations. Young borrowers may struggle with personal loans, rent and daily expenses while facing an uncertain employment market.

Youth unemployment in China remained elevated at 18% in September, according to the figures cited in the source. Limited job opportunities can make it difficult for recent graduates and younger workers to establish stable incomes and meet financial obligations.

At the same time, young people are also entering the debt-collection industry as companies expand their operations to recover unpaid loans.

For Hu, working as a debt collector has changed his own attitude towards spending and borrowing. He told Bloomberg Businessweek that the experience had turned him into a careful spender because he realised how easily someone could end up struggling with debt.

What China’s Consumer Debt Crisis Means for Its Economy

The growing volume of unpaid consumer loans raises concerns about household financial stability and the broader credit market. When people spend a larger share of their income servicing debt, they may have less money available for consumption.

Weaker household spending can affect businesses, particularly retailers, restaurants and service providers that depend on domestic demand. Business difficulties can then contribute to further job losses and income pressure, creating a cycle that makes loan repayment even harder.

For banks, selling non-performing loans can help reduce the burden of overdue assets on their balance sheets. However, the rapid expansion of the distressed-debt market also highlights the need to monitor household borrowing and lending standards.

The growing involvement of private investors creates opportunities in debt recovery, but the business remains dependent on borrowers’ ability to repay. If household incomes remain weak, recovering unpaid loans could become increasingly challenging.

Conclusion

China’s growing consumer debt problem is exposing financial pressure among households despite the country’s position as a major global economic power. An estimated 100 million people may be struggling to service personal loans, while the value of distressed consumer debt sold by banks has expanded dramatically since 2021.

Job losses, business failures, the property market downturn and tighter access to fresh credit are contributing to repayment difficulties. The resulting growth of the bad-debt market has created opportunities for investors and collection companies, but it has also increased pressure on borrowers and the workers pursuing repayments.

As China strengthens oversight of lending and debt collection, the longer-term challenge will be addressing the household financial stress behind the defaults. Without stronger income stability and sustainable borrowing practices, the country’s consumer debt problem could remain a significant concern for households, lenders and the wider economy.