The decline of credit cards in China was arguably foreshadowed as early as 2014—a pivotal year marking a tectonic shift in payment systems, credit infrastructure, and the broader financial ecosystem. This trajectory not only reflects China’s evolving consumer behavior but also serves as a barometer for its economic climate.
On May 10, 2014, amid the sweltering heat of Hangzhou’s West Lake, over 4,000 attendees packed into the Huanglong Stadium. The crowd fell silent as Peng Lei, then CEO of Ant Financial, took the stage. “Was this past year exhilarating? Exhausting? Fulfilling?” she asked, encapsulating the turbulence of a months-long battle between Ant’s Alipay and China’s state-owned banking giants. The showdown began when banks, after witnessing Alipay disrupt payment systems and its money-market fund Yu’e Bao redirect billions in deposits, slashed daily transaction limits for Alipay’s quick-pay service from 50,000 yuan to 5,000 yuan. Industrial and Commercial Bank of China (ICBC), leading the charge, publicly rebutted Alipay’s customer service complaints, deploying Jack Ma’s own words: “We trust Alipay will prioritize user experience.”
Ant Financial held strategic leverage: regulatory tailwinds after internet finance was enshrined in China’s government work report, and explicit backing from central bank governor Zhou Xiaochuan, who vowed not to dismantle Yu’e Bao. Peng Lei eventually de-escalated tensions, conceding that traditional banks remained the “financial system’s aorta,” while fintech firms were mere “capillaries.” By late May, Alipay severed ties with ICBC, pivoting to China Construction Bank for deposit management.
A fragile equilibrium emerged. Ant focused on serving small businesses and younger demographics, while banks dominated corporate finance. Credit cards, however, found themselves squeezed in this new order. Platforms like Huabei (Ant’s virtual credit service) and JD’s Baitiao eroded banks’ foothold by embedding themselves within e-commerce ecosystems. “Save where you can, spend where you want—Huabei outshines credit cards,” became a popular refrain, underscoring how fintech players replicated credit cards’ core function: offering deferred payments, rewards, and installment loans. Yet they operated within closed-loop ecosystems—a structural advantage banks couldn’t match.
The Regulatory Tightrope
By 2019, Huabei’s inclusion in China’s credit reporting system sparked debates: Was it being “absorbed” into the mainstream or legitimized? Years of regulatory dance saw fintech firms testing boundaries, with authorities scrambling to patch loopholes. The government aimed to compartmentalize roles: banks for large-scale financing, fintech for microlending. In 2015, consumer finance pilots targeted lower-tier cities where credit card penetration lagged—a gap fintech rushed to fill.
Real Estate’s Last High
Credit cards briefly resurged in 2017, fueled by a property market frenzy. Ou Xiaocheng, a self-styled “property investment guru,” epitomized this era. Leveraging credit cards and消费贷 (consumer loans), he amassed 35 properties and a 1-billion-yuan fortune by churning debt—a playbook detailed in his handbook The Property Bible. As housing prices soared, credit card cash-outs for down payments became an open secret. By 2017, an estimated 1 trillion yuan was funneled into real estate via cards, with短期消费贷 (short-term loans) surging 87 billion yuan monthly.
The party ended abruptly. In 2020, regulators imposed the “three red lines” to cool property speculation, triggering a credit card winter. Over 100 million cards vanished by 2024, with outstanding balances shrinking by 14.4 billion yuan. Ou’s social media accounts were scrubbed, his empire’s fate uncertain.
Retrenchment and Reckoning
Today’s credit card sector faces a reckoning. Overextension has yielded shrinking issuance, falling transaction volumes, and不良率 (non-performing loan ratios) exceeding 3% at major banks. Employees from shuttered card centers vent on social media: “Is the credit card division some expendable department? They’re liquidating entire teams.” Once-lucrative card perks—airport lounges, hotel stays, cashback—have withered amid cost-cutting.
The economics are unforgiving. Acquiring a new customer costs 500 yuan, but breakeven takes 6–10 years as刷卡量 (spending per card) stagnates. With 660 million new borrowers opting for fintech alternatives since 2019, banks now prioritize high-net-worth clients. China Construction Bank and招商银行 (CMB) dominate credit card贷款规模 (loan volumes), while平安银行 (Ping An) and光大银行 (CEB) retreat. CMB’s premium cards now tout platinum-tier family benefits—unlimited child airfare and VIP access to Beijing’s Mandarin Oriental—to retain wealthy users.
The Forked Road Ahead
Demographics paint a bleak picture. With China’s birthrate plummeting to 9.54 million in 2023, the下一代 (next generation) of potential users is shrinking. Meanwhile,助贷平台 (loan facilitation platforms) like Qifu Technology and Lexin thrive in lower-tier markets, reporting 90%复贷率 (repeat borrowing rates) despite 24% interest burdens—a sign of debt traps, not prosperity.
While policymakers deploy 1.3 trillion yuan in特别国债 (special bonds) to spur consumption, credit cards remain sidelined. Household savings swell, with活期存款 (demand deposits) rising as consumers brace for uncertainty. For banks, survival hinges on迈克尔·波特-esque “differentiation”—either by deepening ties with the affluent or reinventing their value proposition. But as history shows—from Japan’s 1990s card crisis to South Korea’s 2003 credit meltdown—the heyday of plastic may be irrecoverable.
References:
“Peng Lei: The ‘Queen of Alipay’”
“Ou Xiaocheng: Wealth, Disciples, and Deception”
“Consumer Credit Trends in China’s Post-Boom Era”
“Credit Card Contraction: 100 Million Cards Vanish as Spending Plummets”
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