In the US, people who run into insurmountable debt can declare bankruptcy and attempt to regroup. In China, not so much. In fact, the Wall Street Journal reports that people who fall behind on debt—all of them listed "on a publicly available government delinquency blacklist"—face a range of penalties that might surprise Americans. For example, they can be barred from traveling on high-speed trains (a government ID is required) and on airplanes as well. The government also might seize their income and leave them with a small stipend on which to survive. And they're often ordered to forego vacations.
One reason such penalties—and the lack of personal bankruptcy laws—are getting more attention is that the number of Chinese borrowers defaulting on debt has surged into record territory, as the Financial Times reported last year. Roughly 9 million people between the ages of 18 and 59 were on the aforementioned delinquency list, which equates to about 1% of working-age adults in the nation. What's more, household debt is up 50% over the last five years. The total of $11 trillion is below America's total of $17 trillion, but as the Journal notes, "it is a huge sum in a country where people earn far less."
"The runaway increase in defaulters is a product of not only cyclical but also structural problems," Dan Wang, chief economist at Hang Seng Bank China, tells the Financial Times. "The situation may get worse before it gets better." Some Chinese scholars are pushing for the nation to adopt bankruptcy laws, arguing that without them, leader Xi Jinping's stated goal of creating a more equitable nation will never come to pass. One woman who spoke to the Journal says she had to quit a business job because of the travel restrictions imposed upon her when she ran into debt, thus making it even harder for her to repay creditors. Looking at other passengers on the slow-speed trains she must now ride, she wonders, "I wonder if they are all bad debtors like me." (More China stories.)
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