Consumer loans become the bank's new retail "battlefield"

Ask AI · How can banks respond to rising bad debt rates in consumer loans through scene integration?

China Economic Reporter Zhang Manyou Beijing Report

Against the macro background where residents’ consumption willingness needs repair and bank retail business growth is generally under pressure, recent intensive disclosures of listed banks’ annual reports reveal a structural change signal: personal consumer loans are shifting from being a “supporting role” to becoming an important tool for banks to promote consumption and stabilize growth.

Several listed banks’ 2025 annual reports show that their personal consumer loan balances have become a key engine driving retail business. Behind this growth, there is strong policy support, as well as proactive strategic layout and digital innovation by banking institutions themselves. However, as market competition intensifies, concerns about rising non-performing rates in consumer loans have also emerged. How to break out of the “price war” dilemma and achieve differentiated transformation through scene integration and deep customer group cultivation has become an urgent challenge for the banking industry.

Frequent Policy Support · Consumer Loans Become a “Strong Engine” for Retail Growth

From a policy perspective, 2025 can be called a “big year” for consumption stimulation. In 2025, multiple ministries including the Ministry of Finance, the People’s Bank of China, and the China Banking and Insurance Regulatory Commission issued policies on old-for-new consumer goods, fiscal subsidies for personal consumer loans, and other measures to promote consumption. The “14th Five-Year Plan” outline proposed to “vigorously boost consumption” and for the first time included “a significant increase in residents’ consumption rate” as a main goal of economic and social development.

Looking at the recent performance reports of listed banks for 2025, under the frequent policy support, each bank has increased its efforts, and data on consumer loan business has performed remarkably.

For example, among the six major banks, China Construction Bank has shown a noticeable increase in consumer loans. In 2025, the bank’s domestic personal loans and advances reached 9.05 trillion yuan, an increase of 90.5k yuan from 2024, a growth of 2.01%. Of these, personal consumer loans amounted to 177.9B yuan, an increase of 683.17B yuan from 2024, a growth of 29.41%.

Zhao Zhao, Vice President of Bank of China, also introduced that in 2025, Bank of China launched the “Ten Major Gift Packages” for the benefit of the people, injecting over 2 trillion yuan in credit funds into key consumption areas, creating more than 250 billion yuan in property income for customers, with consumption subsidies and fee reductions exceeding 155.28B yuan, benefiting over 20k people; the bank’s personal consumer loan balance grew by 28% in 2025.

Liang Shidong, Retail Business Director of Postal Savings Bank of China, summarized the overall performance of non-housing consumer loans in 2025 as “both volume and price risk are good” during the earnings release. He elaborated: “In terms of volume, Postal Savings Bank’s consumer loans increased by 52 billion yuan in 2025, doubling the growth; in terms of risk, the most core indicator is the non-performing generation rate, which was 0.97% in 2025, down 18 basis points from 2024; in terms of price, thanks to our differentiated risk pricing system, our prices are relatively favorable compared to peers.”

“Price War” Concerns Persist · Differentiated Transformation Becomes the Key to Breakthrough

Although consumer loans have achieved rapid growth in scale, hidden risks lurk behind the prosperity. To seize market share, some banks have lowered interest rates, increased credit limits, and extended terms through “price wars,” leading to increasingly fierce market competition.

Wang Runshi, a distinguished researcher at the Shanghai Financial and Development Laboratory, said that the current interest rate cuts by banks are largely in response to policy calls, combining “fiscal subsidies + financial benefits” to jointly reduce residents’ financing costs. Moreover, banks generally adopt strategies such as increasing credit limits (some products up to 1 million yuan) and extending terms (up to 7 years) to capture market share.

Wang Runshi believes that, in the short term, these strategies are effective, indicating that for price-sensitive customers, preferential policies can indeed stimulate credit demand. However, in the long term, the side effects of this “involution” competition are beginning to show. The most prominent issue is the widespread rise in personal loan non-performing rates. By the end of 2025, the non-performing rates of consumer loans across various banks have significantly increased. This indicates that pure price competition can lead to limited scale expansion but also relaxes risk access standards, over-issuing to high-quality customers, and planting hidden dangers for future asset quality. If residents’ overall consumption confidence and income expectations do not fundamentally improve, simply lowering interest rates will be insufficient to sustain healthy, continuous consumer credit demand.

Faced with this dilemma, industry insiders generally believe that banks must break free from the “price war” trap and shift from “scale priority” to “value priority.” The core is to move from homogeneous competition to differentiated development. Wang Runshi suggests that banks should deeply integrate consumption scenes to realize “frictionless” credit. Banks need to jump out of the mindset of purely financial products, embedding credit services seamlessly into customers’ real lives and consumption processes. Instead of providing loans in isolation, they should establish strategic alliances with upstream and downstream industries and consumption platforms, such as collaborating with new energy vehicle brands to offer one-stop financial services including charging station installation, insurance, and maintenance directly within car purchase apps. Meanwhile, digitalization should be used to create an excellent experience, making loan application processes simple and approval fast, transforming financial services from “sales items” into “lubricants” for consumption.

In practical terms, many banks have already begun exploring deep cultivation of niche customer groups and emerging sectors. Liang Shidong expressed optimism for 2026, stating that although overall consumption is still recovering, with continued policy efforts, especially interest subsidies, demand will steadily grow. He outlined three focus areas for Postal Savings Bank: first, continuously promote proactive credit granting, leveraging data from 680 million customers to provide instant approval and loans; second, target high-quality corporate clients; third, strengthen scene embedding. This includes traditional scenes like automotive parks, where they are exploring establishing specialized auto branches, and emerging consumption fields such as battery leasing and robot consumption.

Additionally, Zhao Zhao pointed out that in 2026, Bank of China will further support entrepreneurship and income growth, enhance consumption capacity, and improve wealth management services, including product selection, asset allocation, and customer engagement. They aim to optimize full lifecycle product management to help residents manage their “money bags,” expand income channels for urban and rural residents, support stable employment and business expansion, strengthen pension financial services, and tailor products for new citizens and recent graduates to help improve the multi-layered social security system and cultivate and release consumption potential from the source. They will also optimize the consumption environment, improve the experience, promote more convenient payment methods in China, upgrade outbound tax refund services, and facilitate inbound consumption. Financial literacy campaigns and consumer rights protection will be continuously strengthened to build a solid safety net.

(Editors: Yang Jingxin; Review: He Shasha; Proofreading: Zhang Guogang)