Bad debts in China

Bad debts in China

Debt collection, Chinese style

Debt-collection videos have become a popular subgenre on Chinese clip-sharing platforms. Many feature young men deftly fielding phone calls from aggressive collectors. Some portray the abuses—hair pulling, slapping—that have come to define a business that has long gone largely unregulated in China. The result has been a Wild West for collections. Debt collectors sometimes impersonate police officers; the details of debtors’ friends and family are sold so that they can be harassed. A swift rise in personal debt, though, is forcing regulators to act.

Between 2015 and 2019 the stock of household debt in China rose by about $4.6trn, close to the $5.1trn accrued by Americans over a similar period before the global financial crisis of 2007-09, according to data from Rhodium Group, a consulting firm. The outstanding balance of delinquent consumer receivables could reach nearly 3.3trn yuan ($500bn) next year, up from just 1trn yuan in 2015, reckons iResearch, another consultancy.

In June the southern city of Shenzhen drafted the country’s first personal bankruptcy law. Courts routinely heard disputes between lenders and borrowers, but allowed only creditors to file suits. The new law, to be rolled out next year, will offer debtors more protection against creditors. A few other cities are conducting similar experiments, though “these reforms are still very limited,” says Li Jiao of Buren, a law firm.