Cyclical Downturn or Structural Transition? Evidence from China’s Household Credit Retrenchment, 2015–2025
Year: 2026
Type: article
Abstract: **Cyclical Downturn or Structural Transition? Evidence from China’s Household Credit Retrenchment, 2015–2025** **Weixiang Gan** * Post-Doctoral Researcher, Lincoln University College, 47301 Petaling Jaya, Malaysia **Shashi Kant Gupta** Lincoln University College, 47301 Petaling Jaya, Malaysia **Mengfei Xiao** Post-Doctoral Researcher, Lincoln University College, 47301 Petaling Jaya, Malaysia **Jialin Liu** School of Management and Marketing, Faculty of Business and Law, Taylor’s University, No. 1, Jalan Taylor’s, 47500 Subang Jaya, Malaysia **Abstract:** This study reassesses whether the post-2021 weakening of China’s household credit is a tem-porary downturn or evidence consistent with a more durable transition. It combines release-audited Peo-ple’s Bank of China lending flows, NIFD leverage stocks, National Bureau of Statistics property and household accounts, and a harmonised BIS cross-country measure for 2024 Q4. In addition to descriptive flow-stock-burden indicators, the revision applies an annual Hodrick–Prescott filter (λ = 6.25), a Chow-style break test at 2022, and small-sample bivariate correlations. New household lending fell from RMB 7.92 trillion in 2021 to RMB 441.7 billion in 2025, while its share of new renminbi loans declined from 39.7% to 2.7%. The break test rejects a common linear path around 2022 (_F_(2,7) = 23.75, _p_ = 0.0008); however, positive cyclical deviations in 2023–2024 caution against treating the contraction as irreversible. On a consistent BIS basis, China’s household credit was 60.0% of GDP in 2024 Q4. Mortgage-related lending and residential sales move closely in both levels (_r_ = 0.969) and annual changes (_r_ = 0.911), and new lending is negatively associated with the deposit–loan gap (_r_ = −0.906). These aggregate associations cannot identify credit supply separately from credit demand or establish household-level causality. Taken together, the evidence is consistent with a structural transition from rapid mortgage-led leveraging toward persistent credit retrenchment, not proof that household borrowing has permanently ended. Policy should therefore support income security, orderly property adjustment, and existing-borrower cash flow while recognising fiscal-capacity and moral-hazard trade-offs. **Keywords:** Household Credit; Deleveraging; Structural Break; Trend–Cycle Decomposition; Property Adjustment; Precautionary Saving **Citation:** Gan, Weixiang, Shashi Kant Guapta, Mengfei Xiao, and Jialin Liu. 2026. “Cyclical Downturn or Structural Transition? Evidence from China’s Household Credit Retrenchment, 2015–2025.” _Accounting and Finance Advances_, September 2, 3–18. https://doi.org/10.67728/afa.2026.002.
Institutions: Lincoln University College, Taylor's University
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: gold
OpenAlex ID: W7204945011