Citigroup in May launched its unsecured individual credit. The bank said it saw the strong market potential, not as a direct reaction to the sluggish domestic property market which has led to stagnant individual mortgages.

Yuan-backed consumer credit in Shanghai dropped for three straight months this year until a May rebound ended the slide. The sluggish mortgage market is the main reason for the decrease through April.

"For us, unsecured consumer credit and mortgage lending are both important," said Standard Chartered. "It's like the right hand versus the left hand."

Chinese mainland citizens who work or live in Shanghai, aged between 18 and 55, can apply for the credit to fund a large variety of purchases, excluding real estate and equity investments.

"As the Chinese economy keeps growing strongly, the demand for personal consumption continues to increase accordingly," said Anand Selva, executive vice president of Citibank (China) Co. "The unsecured personal loan is a frequently used and well-accepted financial tool in many mature markets around the world."

Domestic banks are also moving into the market. Bank of Ningbo, the city commercial bank based in nearby Zhejiang Province, is the sole domestic bank offering similar products in Shanghai.

Bank of Ningbo limits clients to public servants and professionals such as teachers, doctors and financial practitioners.

"The clients' selection is the first bar for us to ward off credit risks," said Jiang Wei, vice president of the bank's Shanghai branch. "The group has a stable income and care about credit reputation."

The bank launched the products in Shanghai last May, and also offers the loans in Hangzhou, Zhejiang Province, after it opened a branch in the city.

After discussion with regulators, the bank requires clients to offer documentation showing the loan purpose, such as decoration contracts or car-purchase agreements.

The bank relaunched the loans in January with the new requirements and a yearly commission of up to 600 yuan after it suspended the products for system updates and risk control in September.

(Shanghai Daily June 16, 2008)