TheEconomistJune 1st 2019 511T
he caseof Mr Ke, a carpenter from the
eastern city of Taizhou who fell deep
into debt, may one day be noted in histor-
ies of China’s financial evolution. On May
9th a local court announced that it had ar-
ranged for Mr Ke’s liabilities to be written
off. This was made possible by what state
media described as the country’s first ever
regulations concerning the clearing of per-
sonal debt. Sadly, for now, they only apply
in Taizhou.
Mr Ke—the court did not reveal his full
name—had fallen victim to fraud eight
years ago. By last year the 54-year-old’s
debts totalled 480,000 yuan ($70,000),
owed to three banks. But the court took ac-
count of Mr Ke’s predicament. He has no
income, a home with only one room and
less than 100 yuan in savings—the equiva-
lent of what he would earn in under seven
hours on the local minimum wage.
In America, Europe and many other
countries Mr Ke’s problems would have
been swiftly handled according to national
regulations on bankruptcy. China, how-
ever, still has no such rules for discharging
penniless people’s debts. Officials in Tai-
zhou say Mr Ke is the first beneficiary of a
procedure the city’s own judiciary devised
for dealing with such cases. It is modelled
on China’s law relating to the winding-up
of insolvent firms.
For an individual in China, it is easy to
fall into debt without being spendthrift.
Most at risk are the many millions of peo-
ple who run small businesses. They often
have to give a personal guarantee for their
business-related borrowings. Medical bills
are another common cause of ruin, as are
natural disasters. After an enormous earth-
quake in the south-western province of Si-
chuan a decade ago, thousands of families
who had lost their homes were asked to pay
off their mortgages.
In recent years easier access to consum-
er credit has been creating new risks formany people. The Chinese government has
been cautiously promoting such borrow-
ing because it wants people to spend more
and thereby give the economy a boost and
reduce its reliance on investment. The
amount of household debt in China was
about half of its gdpat the end of last year,
up from less than one-third in 2013. In
America the ratio of such debt to gdpis a
little over 75%. China is catching up fast as
its citizens make increasing use of mort-
gages, credit cards, bank loans and online
lenders of varying repute. There may be
much lending through the internet that is
not captured by official statistics.
Debtors who cannot keep up with pay-
ments can face horrors. First, there are the
debt collectors. Agencies that employ them
are becoming more professional. But late
payers are still prone to abuse, especially if
they have borrowed from shady people.
State-controlled media say the collectors’
tactics have included threatening debtors
with red liquids while claiming to have
hiv. Two years ago a 22-year-old man was
jailed for life after stabbing and killing a
collector who, he alleged, had exposed
himself to his mother (after an outcry, his
sentence was cut to five years). Some col-
lectors have worked out how to track their
targets by hacking their instant-messaging
apps. In February police said they had ar-
rested a man who was selling people’s loca-
tions for one yuan per pinpoint.
Then there are the lenders themselves.
Disreputable ones have required borrow-Personal bankruptcy
A way out
BEIJING
China is clamping down on people who default on their debts. It should accept
that some of them also need help
China
52 NewlandforHongKong?
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