China's Banks Allowed to Extend Bulk Bad Loan Disposals for 2026

China’s banks have been allowed to transfer bad personal loans in bulk until the end of this year, according to a new report.

The decision, by the country’s financial regulator, has been made as lenders struggle with rising consumer loan defaults and credit card delinquencies, sources have told Reuters.

The National Financial Regulatory Administration (NFRA) issued a notice enabling banks and asset management companies to continue transferring and disposing of non-performing personal loans through till the end of 2026, the two sources reportedly said. The programme was due to finish at the end of 2025.

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The policy, first introduced in 2021, was initially restricted to six state-owned banks and 12 joint-stock banks, with other lenders to handle non-performing personal loans through self-collection or write-offs.

The programme was expanded in late 2022 to include policy banks, some regional banks, trust companies and consumer finance firms.

Transfers to debt recovery firms

The programme allows banks to sell pools of bad personal loans to asset management companies via an official transfer platform, the Banking Credit Asset Registration and Transfer Centre.

Asset management companies typically acquire distressed assets at a discount and try to recover money through methods including debt restructuring, asset sales or legal proceedings.

The transfers must follow transparent due diligence and asset valuation procedures, according to regulatory requirements.

The move shows Beijing’s efforts to give banks more breathing room to manage deteriorating asset quality in a slowing economy hit by a debt crisis in the property sector and sluggish consumption.

Bad loan ratios on personal loans, which account for about 30% of the total loan book of state banks, have been rising. Chinese banks have accelerated their disposal of soured loans as profit margins hit record lows.

The sources declined to be named as they were not authorised to speak to the media. The NFRA did not immediately respond to Reuters’ request for comment.

Industrial and Commercial Bank of China (ICBC), the world’s largest commercial bank by assets, reported its non-performing ratio for personal consumer loans rose to 2.51% at the end of June, up 0.12 percentage points from the end of 2024.

The bank’s credit card delinquency rate reached 3.75% at the end of June, a 0.25 percentage point increase.

Transfers of personal bad loans under the programme surged to 107.6 billion yuan in the first half of 2025, more than double from the same period in 2024, state-run Securities Times reported.

IKEA to close 7 China stores

Meanwhile, in related news, furniture retailer IKEA is closing seven stores in China from February 2, it said in a statement on Wednesday.

The stores earmarked for closure include one in suburban Shanghai, another in Guangzhou, and several more in second-tier Chinese cities such as Nantong, Xuzhou and Harbin, IKEA said in the statement, posted on its official WeChat account.

Retailers in general have been struggling to grow sales in China, where consumer sentiment remains muted following a prolonged property crisis and concerns about employment security and stagnant wages.

There are currently around 40 IKEA stores in mainland China, and the statement said five new stores of various sizes have recently opened.

China, the world’s second-largest economy, accounts for around 3.5% of IKEA’s global sales. With a growing percentage of sales in the country coming from online flagships, IKEA opened a new store on JD.com last August to help cultivate that online sales growth.

“We will shift from scale expansion to precise cultivation, exploring Beijing and Shenzhen as key markets, and opening more than 10 small stores in the next two years,” IKEA said in its statement, adding that new store openings in Dongguan and Beijing were expected in the first half of 2026.