Credit card delinquency rises in China

MarketWatch is reporting that credit card delinquency rate in China has risen:

Credit-card debt at least six months overdue rose 126.5% for the first three quarters of 2009 compared to the same period last year, Xinhua news agency reported, citing People's Bank of China data.

By the end of September, China's banks had issued 175 million credit cards, a 33.3% increase from last year, according to the report -- which said that the central bank has warned of potential risks of mounting overdue credit-card debt.

Accounts overdue by six months or more made up 3.4% of China's total credit-card debt outstanding at the end of the third quarter, a 0.3% increase over the prior period, the report said.

I know very little about credit card debt metrics. I have no idea if a 3.4% delinquency rate is high for China.

I don't know anything about USA's credit card statistics either but Googling produced a TransUnion press release suggesting that the "national credit card delinquency rate (the ratio of bankcard borrowers 90 days or more delinquent on one or more of their credit cards) dropped to 1.10 percent in the third quarter of 2009." According to this somewhat dated Reuters news story, "Equifax, which provides credit data to businesses like banks, credit card issuers and retailers, said the average delinquency rate in Canada as of June 30 was 1.56 percent..." The time periods for the US and Canadian numbers (90+ days) differ from the Chinese one I highlighted above (180+ days) but it should givea a very rough idea.

Also, unlike America or Canada, I suspect that credit card debt is a small portion relative to the total economy (differing collection methods, bankruptcy laws, etc., also make direct comparisons meaningless.) So, I am simply using this news to gauge the situation over there and observe if things are improving or getting worse.

If there is a debt implosion in China, it will have little to do with credit cards (since their usage is limited.) Instead, the big risk in China is real estate. The Chinese government has very strong financial resources (i.e. good foreign reserves and savings) so they can absorb losses as long as it isn't catastrophic (they can't absorb Japan-like losses but I have little reason to suspect a bubble, if it actually exists, is anywhere near 1990 Japan.) However, any large losses will cause huge political problems. Just like how Dubai appears to have lost power and is now thought to be under political control of UAE, which is heavily influenced by Abu Dhabi, a similar thing can materialize in China (my wild guess is that the current "faction" controlling the national government won't survive such a crisis.)