Breakneck growth in China’s credit-card debt since 2012 raises worries about a potential bust, says ratings agency S&P

Credit-card debt has grown more than sixfold in China since 2012, mirroring booms in other Asian markets that ended badly and raising concerns about the potential risks to Chinese banks, according to a new report from S&P Global Ratings.

The credit rating agency said that unsecured consumer lending in the mainland is expected to increase at a rate of 20 per cent annually for the next two years, a slight slowdown, but reminiscent of problematic booms in Hong Kong, South Korea and Taiwan.

At the same time, the credit-score and credit-behaviour models used by banks in China have not been fully tested by a consumer downcycle, S&P said.

“We also anticipate that marginal players and latecomers to unsecured consumer lending are likely to compete aggressively, tapping into riskier customer segments,” Liang Yu, an S&P credit analyst, said in a research note.

“Increasing business partnerships between banks and some types of fintech firms can also multiply asset-quality risk for some banks; in particular, banks with limited experience in unsecured consumer lending and/or inadequate capability in managing risks associated with a rapid increase in such exposures,” Yu said.