China Scrubs Small Overdue Debts from Credit Files to Boost Lending

China’s People’s Bank (PBOC) announced a one-off policy allowing overdue personal credit records involving amounts up to 10,000 yuan (roughly $1,400) to be scrubbed from the nation’s credit reporting system, provided the debt is fully repaid by March 31, 2026. The measure applies to debts incurred between January 1, 2020 and December 31, 2025 and aims to help individuals with minor overdue payments rehabilitate their credit standing. This approach is designed to remove a barrier that often prevents borrowers from accessing credit, especially in a climate where lenders are increasingly cautious. 

Policymakers are pursuing this credit repair mechanism against a backdrop of disappointing economic performance, including weaker lending growth and slowing retail sales, prompting concerns about domestic demand. By allowing qualified individuals to effectively “reset” small blemishes on their credit histories, authorities hope to enhance borrowers’ creditworthiness and incentivize renewed engagement with financial products such as mortgages, auto loans, and small business financing. Vice Governor Zou Lan of the PBOC highlighted the move’s focus on promoting high-quality growth and expanding inclusive financial services, particularly for low-income households and small-scale borrowers. 

The policy marks a departure from China’s traditionally stringent credit reporting norms, where overdue records can significantly hinder an individual’s ability to obtain future loans. By limiting eligibility to smaller debts and requiring full repayment, the government seeks to balance credit risk management with economic stimulus objectives. This initiative reflects a broader willingness by authorities to deploy targeted credit and fiscal tools in response to softer economic momentum, without resorting immediately to more aggressive monetary easing such as cuts to reference interest rates or reserve requirement ratios. 

Financial institutions and consumer advocates have largely welcomed the policy as a pragmatic step toward reducing the long-term economic scarring caused by temporary financial setbacks, especially during and after the COVID-19 pandemic years. Restoring access to credit for responsible borrowers may help spur household consumption and bolster confidence in financial markets. It also aligns with broader regulatory themes aimed at stabilizing the economy through incremental reforms rather than sweeping interventions. 

As China’s leadership balances growth with financial stability, this credit repair initiative could pave the way for additional targeted measures to support lending and consumption. Observers will be monitoring how banks respond in terms of loan offerings and underwriting standards, as well as whether similar reforms are extended to other segments of the credit system to sustain economic momentum into 2026.