Aggregate household debt balances increased by $313 billion in the second quarter of 2021, a 2.1% rise from 2021Q1, and now stand at $14.96 trillion. Balances are $812 billion higher than at the end of 2019 and $691 billion higher than 2020Q2. The 2.1% increase in aggregate balances was the largest seen since 2013Q4 and marked the largest nominal increase in debt balances since 2007Q2.
Chinese regulators attempting to rein in Ant Group Co. and a swelling online-lending industry have a target in their sights: the excessive, debt-fueled lifestyles of the country’s youth.
Leading up to last year’s coronavirus pandemic, a new generation of tech-savvy and free-spending citizens helped power rising consumption, a growing driver of China’s economy.
Many used short-term loans to pay for expenses such as prestige cosmetics, electronic gadgets and costly restaurant meals. They found credit easy to obtain, thanks to Ant and other Chinese financial-technology companies that provided unsecured loans to millions of people who didn’t have bank-issued credit cards. In 2019, online loans accounted for as much as half of short-term consumer loans in China, according to estimates from Fitch Ratings.
Now, new financial regulations are forcing lenders to reassess their business strategies and have sparked a reckoning about the American-style borrowing and spending habits of China’s younger population. Starting in 2022, Ant and its peers will have to fund at least 30% of the loans they make together with banks, a rule designed to make online lenders bear more risk.