Chinese banks rejected nearly US$144 billion in loans last year using credit scoring system, central bank says
- People’s Bank of China highlights deleveraging campaign in bid to reduce high debt and risky lending after Chinese banks blocked 1 trillion yuan of lending in 2018
- Bank also received alerts on outstanding ‘high risk’ loans and also collected non-performing loans
Chinese banks used the government’s new centralised credit scoring system to reject loan applications worth nearly 1 trillion yuan (US$144 billion) last year, the People’s Bank of China reported Friday, showcasing that its deleveraging campaign to reduce high debt and risky lending is succeeding.
In total, 21 banking institutions rejected loan applications worth 911.7 billion yuan (US$131.7 billion) from “high risk” customers, while also receiving alerts on outstanding “high risk” loans worth 1.301 trillion yuan (US$188 billion) and collecting 159.4 billion yuan (US$23 billion) worth of non-performing loans, The People’s Bank of China (PBOC) said. The central bank did not specify whether the loans were from consumers or business clients, although the credit scoring system covers both.
It plans to expand the credit scoring system and the quality of information it contains to allow banks to make even better judgments about a clients’ risk. It is also intending to provide information that may be difficult for banks find themselves regarding credit histories so that they can increase lending to small and micro businesses.
In response to the rapid rise in risky lending over the past decade, as well as the sharp acceleration of internet-based lending in recent years, China has been building an increasingly comprehensive consumer credit reporting system that includes information collected from foreign firms.
Last year, the country launched a new consumer credit bureau, Baihang Credit Scoring, to support the established government-run credit reporting service, the Credit Reference Centre, a unit under the central bank, to facilitate data collection and information sharing among participating lenders.
The enterprise credit information system includes data on 13.7 million small and micro businesses, accounting for 53 per cent of all firms, according to the central bank. At present, there are nearly 26 million enterprises included in the credit information system. Among them, 3.71 million small and micro enterprises have obtained credit support, with the total amount of outstanding loans reaching 33 trillion yuan (US$4.8 trillion), data from the central bank showed.