News Forum

Consumer Credit Database System Reduces Loan Risk in China
Source: China Daily - North American Edition - July 24, 2002

Local commercial banks can now utilize consumer credit ratings to reduce risks and control costs when approving personal loans, thanks to the city's two-year-old Consumer Credit Database System (CCDS), which contains credit information on over 2.73 million citizens. "The requests for credit references have been increasing since we issued our first file on July 1 two years ago. We now issue an average of 1,500 credit reports per day, compared with 400 a day two years ago," said Yu Wenqian, spokeswoman for Shanghai Credit Information Services (CIS), owner of the system.

CCDS now covers about 30 per cent of Shanghai's consuming power. It offers banks a tool to check their clients credit records and thus reduce risks in making personal loans. 

"This helps create and stimulate a healthy and mature loan market," she added.

Furthermore, the system, making citizens realize there is such a mechanism tracking their credit record, pushes local residents to pay their bills or loans more promptly. Shanghai Mobile, Shanghai Unicom and local gas and water suppliers noticed a sharp decline in payment delay after they joined CCDS.

However, experts point out the system still has a long way to go. Local banks approve some 4,000 consumer credit transactions every day, which means only one-third of all loans granted have been cleared by a CCDS credit check.

Though improved, Gu Mingde, an official with the Shanghai branch of People's Bank of China, said the project cannot be called a success until over 70 per cent of the loans go through the system.

He believes the ratio will keep on rising, as the city's consumer credit business is soaring.

By the end of last year, Shanghai's consumer loan balance had surpassed 70 billion yuan (US$8.4 billion), 10 per cent of all bank loans, much higher than the nation's 4.4 per cent average.