China’s Punishment for People With Bad Debts: No Fast Trains or Nice Hotels

Qin Huangsheng once imagined a better life in the city when she left her home village to become a factory worker at age 16.

Now, in her early 40s, she has $40,000 in personal debt and a base salary of $400 a month.

Debt collectors are hounding her. She is blocked from buying tickets on China’s high-speed rail, just one of the penalties the government is increasingly imposing on people who don’t pay their bills.

On the aging slow trains she is left to ride, Qin sometimes looks at the other passengers and thinks: “I wonder if they’re all bad debtors like me.” People across China are being weighed down by their debts and a system that penalizes them for not paying the money back. Beijing is cracking down on delinquent debtors by seizing their salaries or restricting them from getting government jobs, as well as curbing their access to high-speed trains and air travel. Many are forbidden from buying expensive insurance policies and told they aren’t allowed to go on vacation or stay in nice hotels. Authorities can detain them if they don’t comply.The number of people on a publicly available government delinquency blacklist has jumped by nearly 50% since late 2019 to 8.3 million today. Courts can put people on the blacklist when they don’t fulfill judgments against them to pay money back or are deemed to be not cooperating with legal proceedings.

Unlike in the U.S., China doesn’t allow most people—including those who had a run of bad luck—to declare bankruptcy to write off bad debts and move…   on with their lives, a policy some Chinese scholars are criticizing as unfair.

Household debt has surged by 50% in the past five years to around $11 trillion today. While that is lower than the $17.5 trillion Americans owe, it is a huge sum in a country where people earn far less.

With home prices falling, deflation risks becoming entrenched and unemployment a persistent challenge, Chinese leaders are eager to get people spending more. But each additional dollar going to pay for debt is taking away one that could be used to splurge on new clothes or pay for a vacation.

The threat of punishment for falling behind on debt is making many families more conservative with their money.

Retail sales of consumer goods in China rose 4.7% on year in the first quarter, the government said Tuesday, lagging behind total economic growth of 5.3%. As many in China curtail spending, the government is giving priority to turbocharging manufacturing and exports, a strategy that is exacerbating trade tensions with the West.