BEIJING — Chinese banks have piled up a mountain of debt on auto loans, according to a senior researcher with the State Development and Reform Commission (SDRC).
Chen Xinnian, director of the department of flow and consumption research in the SDRC’s Economic Research Institute, announced in late October that bank debts related to car loans had reached more than ¥100 billion ($12.5 billion), with 81 percent of them coming from the “Big Four” State banks (Bank of China, Agricultural Bank, China Construction Bank, and Industrial and Commerce Bank of China).
The way credit is computed depends on the economic climate at the time. When the auto industry expands quickly, credit consumption on car loans becomes easy. Most auto dealers have made more money on car loans than on sales, so they are often eager to offer high-interest loans to car buyers without considering the consequences.
But China has yet to build a sound individual credit system for car owners, which is the root cause of debts related to auto loans. The key to preventing bad debts while encouraging credit consumption, Chen said, is to build and improve a nationwide personal credit system as soon as possible.