On Tuesday (April 16), China released data showing that its economy had grown far more than expected in the first quarter of 2024. While this is a reason for Beijing to smile, personal debt is a reason to worry.
It’s a growing burden and Chinese authorities realise this. They have stringent measures to crack down on delinquent debtors.
If you have personal debt, you become an outcast of sorts. You are put on a government blacklist, which is ever-growing: The number of people on it has jumped by close to 50 per cent since last 2019 to 8.3 million today, according to a report in The Wall Street Journal (WSJ). This is about one per cent of the country’s working-age adults.
We take a look at how China is unforgiving towards those with personal debt.
Punishing people with debt
Unlike the United States, China does not permit individuals, even those who have a streak of misfortune, to file for bankruptcy to write off their debts and start afresh. What it does instead is penalise them.
An aerial view shows residential buildings at the construction site of Evergrande Cultural Tourism City in Suzhou’s Taicang, Jiangsu province. File image/Reuters
An aerial view shows residential buildings at the construction site of Evergrande Cultural Tourism City in Suzhou’s Taicang, Jiangsu province. File image/Reuters
Chinese authorities blacklist debtors, making it impossible for them to go about their everyday business. They cannot use toll roads, purchase online tickets or use electronic payment apps like Alipay and WeChat. Many stores in China do not accept cash payments making it difficult for defaulters to buy essentials like food, says a report in Voice of America (VoA).
Individuals are restricted from using high-speed rail and air travel; they cannot purchase costly insurance plans or enjoy leisure activities such as vacations and stays in upscale hotels. Failure to adhere to these restrictions can result in detention by authorities, reports WSJ.
The blacklisted Chinese have difficulty getting more loans and some are even banned from working as civil servants. In case of unpaid debts, authorities seize a person’s income to cover the liabilities, leaving them with a meagre allowance to meet their daily expenses. Despite attempts to seek relief through legal channels, such as petitioning for increased allowances, debtors often face unfavourable outcomes.
The Chinese government had earlier said that it only targets those who can repay debts but refuse to do so. But that appears far from the truth. The country’s indebted population continues to grow as the economy faces challenges and unemployment is a concern.
China’s personal debt burden
People across the country are heavily burdened with debt. According to a report in The Financial Times, there were 5.7 million defaulters in 2020. In four years, that number has soared to 8.3 million. That is a staggering increase of 46 per cent.
A China yuan note is seen in this illustration photo. Image used for representational purposes/Reuters
A China yuan note is seen in this illustration photo. Image used for representational purposes/Reuters
