Why Zero-Yuan Phone Plans Suddenly Vanished in China

Why it’s suddenly everywhere

1. 01

   On September 24, 2026, all three Chinese carriers — China Mobile’s "Hebao Credit Purchase", China Telecom’s "Orange Installment" and China Unicom’s "Wo Installment" — stopped accepting new installment applications on the same day, with no announced return date.

2. 02

   The "free phone" was actually a 24- or 36-month consumer loan buried in the monthly bill; falling behind on the phone bill now meant a loan default reported to the central bank’s credit system.

3. 03

   On the Black Cat complaint platform, China Telecom’s Orange Installment alone had drawn about 5,850 complaints by August 2025 — most from users who never knew they had signed a loan.

4. 04

   The new "Administrative Measures for Online Marketing of Financial Products", issued by eight regulators led by the People’s Bank of China, takes effect September 30, 2026 — banning exactly the kind of bundled, downplayed-loan sales the business ran on.

The timeline

1. 2009–2012Subsidized contract phones arrive

   In the 3G era, carriers fight for smartphone users with "prepay bills, get a free handset" deals. The model helps Unicom and Telecom land the official iPhone and poach premium customers.

2. 2014–2016Terminal subsidies wind down

   Beijing orders state-owned carriers to slash marketing expenses; terminal subsidies — at one point eating a large share of carrier profits — are cut, and Caixin declares the classic contract phone near its end.

3. 2018–2021The loan reboot

   The free phone returns in financial form: "credit purchase" installment plans co-built with consumer finance arms — Unicom’s Zhaolian (a joint venture with CMB-affiliated CMB Wing Lung), Telecom’s BestPay-linked Orange Installment, Mobile’s Hebao Credit Purchase.

4. 2023–2025Complaints pile up

   Users discover loans they never knowingly signed: a 1,399-yuan phone costing 5,400 yuan over 36 months; credit records damaged by unpaid "phone bills". Orange Installment alone logs ~5,850 Black Cat complaints by Aug 2025.

5. 2026-04Eight regulators move

   The PBOC and seven other agencies issue the Administrative Measures for Online Marketing of Financial Products, requiring clear disclosure and banning bundled-sales defaults — with a September 30 effective date.

6. 2026-09-24All three halt at once

   Mobile, Telecom and Unicom suspend new enrollments in their installment products the same day; existing contracts continue. Hunan Mobile’s notice says sales stopped 24:00 on Sep 23.

The backstory

A phone bill that was secretly a loan

The pitch sounded harmless: keep paying your monthly plan, walk out with a free phone. The paperwork said otherwise. Under the “credit purchase” model, a consumer finance company or leasing firm paid the carrier for the handset upfront, and the user signed — often without realizing it — a 24- or 36-month loan. Each month, part of the phone bill was routed back through a payment arm (China Telecom’s BestPay, in the Orange Installment case) to repay the lender. The user saw one phone bill; underneath sat a telecom service contract and a credit contract stapled together.

That stapling is what turned an ordinary telecom product into a financial risk. Miss a phone payment before, and your service was suspended. Miss one under this model, and the carrier’s subsidy stopped while the loan did not — the installment went overdue, and the record landed in the PBOC credit system, where it could surface years later in a mortgage or car-loan application. 21st Century Business Herald documented users who only learned of their loans from collection texts, and cases where sales staff photographed customers holding the disclosure notice without ever explaining it. One Guangdong family discovered their father’s “free phone for loyalty points” only when Zhaolian Finance’s collection messages began arriving; a Hunan user found a 1,950-yuan, 36-month loan on his name days after a door-to-door salesman promised a gift for staying on the network.

The economics pushed frontline staff toward silence. Most carrier stores are run by third-party franchisees whose clerks earn base pay of a few hundred yuan a month plus commissions, and the installment contract was the sharpest tool for hitting terminal-sales and lock-in targets — as one veteran clerk told 21st Century, if you say the word “loan” out loud, nobody signs. Analyst Fu Liang traces the lineage further back: the 3G-era “prepay bills, get a phone” subsidy demanded thousands of yuan upfront, and the credit model lowered that barrier — a genuine innovation that curdled as channel incentives rewarded selective disclosure.

Why all three quit on the same day

Three pressures converged. First, regulation: the new Measures taking effect September 30, 2026 require financial marketing to be accurate and unmisleading, ban setting bundled options as default consent, and forbid inducing users with one-sided promotion of first-installment discounts — a checklist of the model’s standard playbook. The eight issuing departments had explicitly told institutions to clean up non-compliant marketing before the effective date. Regulators had also been dismantling the adjacent “rent-a-phone-for-cash” business, where annualized costs reportedly ran past 80% and even 300%, and the crackdown mood was unambiguous.

Second, the business had become what economist Pan Helin calls a “negative asset”: handset retail is a zero- to negative-margin line for carriers, new-user growth has stalled in a saturated market, number portability defanged the long lock-in contract, and every successful sale created a potential complaint and brand liability. Third, cost pressure rose just as scrutiny did: from January 1, 2026, VAT on mobile data, messaging and broadband access rose from 6% to 9%, an increase carriers must absorb internally under stable retail prices — with industry net profit facing an estimated 10–15% hit, per 36Kr’s analysis. The 2024 directive pushing central SOEs to exit non-core financial businesses (“退金令”) had already led China Telecom’s e-commerce arm to list its micro-loan, guarantee and insurance-brokerage stakes for sale.

So the same-day halt was less a coincidence than a deadline. Within days of the Measures’ effective date, continuing a sales model built on downplaying loans would have been indefensible. It is the same fault line now rattling American prediction markets, where Kalshi’s eye-popping volume figures are being questioned just as the company chases a reported $40 billion valuation — in both cases, growth stories built on blurred lines meet regulators who have started reading the fine print. Carriers publicly framed it as a “system upgrade” with no return date — language that leaves the door open to a compliant relaunch, though as one channel dealer told 36Kr, a version that puts the loan contract on the table and returns real choice to users may find far fewer impulse buyers. The episode closes a chapter that began with 3G subsidies: for two decades, the cheapest-looking way to get a phone in China was through a carrier, and each generation of that model hid its costs a little deeper.

Key facts

Suspension date

Sep 24, 2026

Products halted

Hebao / Orange / Wo

Loan terms

24–36 months

Complaints (Orange)

~5,850 by Aug 2025

New rule effective

Sep 30, 2026

Existing users

Unaffected

What people are saying

Common questions

I already signed an installment contract. What happens now?

Nothing changes. All three carriers confirmed existing contracts stay in force and are honored under the original terms — keep paying the bill on time, since an overdue phone bill can still trigger a loan delinquency on your credit record. When the contract ends, you can switch to whatever plans are on sale then.

Was the phone ever actually free?

In the best case, yes on paper: if you would have paid that monthly plan anyway and never missed a payment, the subsidy made the handset genuinely cheap. The catch was the price of getting it wrong — an invisible consumer loan, penalty clauses for switching carriers, and credit-report damage that a plain phone bill could never cause.

Will zero-yuan phone deals come back?

Possibly, in a compliant form — the official wording is "upgrade", not abolition. But the September 30 rules require prominent loan disclosure and ban default-consent bundling, and a version of the product that follows them loses the information asymmetry it relied on. Some frontline teams are already pivoting to old-style prepay-and-refund offers instead.