Mainland credit-card debt surges

PUBLISHED : Thursday, 20 May, 2010, 12:00am
UPDATED : Thursday, 20 May, 2010, 12:00am

Unpaid credit-card debts continued to rise on the mainland in the first quarter of this year despite intensified efforts by Beijing to crack down on fraud involving misuse of plastic.

The People's Bank of China said yesterday that 8.8 billion yuan (HK$10.03 billion) of credit-card debt was at least six months overdue, up 1.1 billion yuan or 14.4 per cent from the end of last year. The overdue amount represented 3.5 per cent of the total outstanding credit-card debt, 0.4 percentage points higher than the end of last year, it said.

An official with China UnionPay, the mainland's sole domestic interbank card operator, said the PBOC launched an inquiry into one of the company's electronic-payment units recently, probing suspicious deals.

'The delinquency rate will continue to climb as the credit-card business is still growing on a fast track,' said Guotai Junan Securities analyst Wu Yonggang. 'But it is still early to gauge the severity of the problem since the figure of credit-card transactions is relatively low in China.'

Credit-card transactions were valued at 1.48 trillion yuan in the first quarter, up 42.9 per cent from a year ago, or 8.5 per cent from the previous quarter.

The central bank said the banking sector was facing increasing risk of credit-card delinquencies.

The UnionPay official said investigations had found that some retailers were colluding with cardholders to commit fraud. 'The central bank has been aggressive in investigating into credit-card frauds,' the official said. 'It proved that the delinquency problem was getting worse.'

The mainland's banks issued 2.17 billion credit cards at the end of March, 14.9 per cent from a year ago.

Beijing warned banks to ease aggressive marketing tactics in the credit-card sector at the end of last year as delinquencies more than doubled from the previous year. In contrast, early in the decade, authorities had encouraged banks to expand the credit-card business, hoping to spur retail sales.

Mainland banks used to offer gifts to attract people to sign up for credit cards, and some banks also designated third-party companies to issue cards regardless of applicants' credit-worthiness. The strategy has backfired in recent years amid a rise in the incidence of fraud. In the first eight months of last year, public-security authorities handled more than 6,300 cases involving credit-card fraud with a total value of 440 million yuan.

In December, the Supreme People's Court and the Supreme People's Procuratorate jointly issued said cardholders would face charges if they fail to pay the settlement three months after receiving the second notification letter from banks.