Chinese banks speed up bad loan sales amid economic recovery. NPL-backed securities rise 40%, real estate slump. 30% pay cuts, 5% home price decline wipes trillions.

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Chinese banks accelerate bad loan sales amid rising consumer defaults in the post-COVID economic recovery. Record issuance of non-performing loan-backed securities, up 40%. Real estate meltdown hits middle-class wealth, with 30% pay cuts, stock and property losses. Households reassess money priorities, facing the impact of a 5% decline in home prices wiping out trillions in housing wealth.

China: The booming market for bad loans underscores the challenges facing a banking sector grappling with a real estate crisis, local government debt woes and rising individual delinquencies

SHANGHAI/SINGAPORE, Dec 18 (Reuters) – Chinese banks are putting bad loans up for sale at a record pace, as regulators push for faster disposal of sour debts amid rising consumer defaults during an ailing post-COVID economic recovery.

Issuance this year of securities backed by non-performing loans (NPLs) is set to jump about 40% from a year ago to a record, data from a ratings agency showed, as lenders rush to offload distressed assets linked to mortgage, credit card and consumer borrowings.

This week alone, six banks including China Everbright Bank (601818.SS) and Bank of Jiangsu (600919.SS) plan to issue 1.5 billion yuan ($210.49 million) worth of asset-backed securities (ABS) based on bad loans, according to sales prospectuses reviewed by Reuters.

China’s Real Estate Meltdown Is Battering Middle Class Wealth [workers are getting 30% paycuts!]

(Bloomberg) — Stock investments: down 30%. Salary package: down 30%. Investment property: down 20%. As Thomas Zhou reflects on 2023, his household finances are front of mind.

“It’s just heart-breaking,” the 40-year-old financial worker from Shanghai said. “The only thing that still keeps me going is the thought of keeping my job so I can support my big family.”

Zhou’s predicament will resonate with many people in China, where slumps in the real estate and stock markets are wiping away household wealth. And as the world’s second-largest economy struggles to regain momentum after years of Covid-19 lockdowns, there’s also the growing threat of unemployment.

Now, middle class households are being forced to rethink their money priorities, with some pulling away from investing, or selling assets to free-up liquidity.

At the heart of the decline in family wealth is China’s real estate meltdown, which having a pervasive effect on a society where 70% of family assets are tied up in property. Every 5% decline in home prices will wipe out 19 trillion yuan ($2.7 trillion) in housing wealth, according to Bloomberg Economics.

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