China telecom operators suspend zero-yuan phone installment services

China's three major state-owned telecommunications operators—China Mobile, China Telecom, and China Unicom—have suspended all new applications for their financial installment services as of September 24. The affected products include “He Bao Credit Purchase,” “Orange Installments,” and “Wo Installments,” which were frequently marketed to consumers as “zero-yuan phone purchases” or “free mobile phones” tied to specific service plans.

The suspension follows widespread consumer complaints regarding the true nature of these offers. Many users reported being misled into signing consumer loan contracts under the impression they were merely receiving hardware subsidies. A significant risk identified is that if a user fails to pay their monthly phone bill, the operator's subsidy stops, but the underlying loan remains active, potentially leading to defaults that damage the user's personal credit rating.

Industry analysts attribute this move to tightening regulatory oversight. The upcoming implementation of the “Measures for the Administration of Internet Marketing of Financial Products” mandates greater transparency in bundled sales and prohibits misleading marketing that obscures the reality of installment payments. This regulatory shift aims to crack down on “hidden loans” and predatory lending practices within the telecom sector.