Could sympathy for debtors help boost consumption in China?
Shenzhen becomes the first Chinese city to offer personal bankruptcy protection
SEVEN OR EIGHT times a day, aggrieved creditors would call Liang Wenjin demanding payment. A resident of Shenzhen, an entrepreneurial Chinese city bordering Hong Kong, Mr Liang had started a business in 2018 making Bluetooth headsets. But his company failed to connect with the market, and covid-19 dealt a final blow. Mr Liang returned to work as an engineer. But his debt of 750,000 yuan ($115,000) remained, a lingering weight on his finances and his mind.
Debts like Mr Liang’s have risen quickly. From less than 40% of GDP in 2015, household loans exceeded 62% at the end of last year. The biggest chunk was mortgage debt, a by-product of China’s runaway property market. “Operating loans” of the kind weighing on Mr Liang accounted for about a fifth of the total.
This article appeared in the Finance & economics section of the print edition under the headline "Sympathy for the debtor"
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