Disreputable lenders have required borrowers to surrender the contacts stored on their mobile phones, so that family and colleagues can be hassled if payments are missed
of Mr Ke, a carpenter from the eastern city of Taizhou who fell deep into debt, may one day be noted in histories of China’s financial evolution. On May 9th a local court announced that it had arranged 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 personal debt. Sadly, for now, they only apply in Taizhou.
In recent years easier access to consumer credit has been creating new risks for many people. The Chinese government has been cautiously promoting such borrowing 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 itsat the end of last year, up from less than one-third in 2013. In America the ratio of such debt tois a little over 75%.
The government could do more to reduce unnecessary suffering. It is already trying to educate the public about the risks of borrowing and to eradicate the most shady lenders. But a personal bankruptcy law is also urgently needed. Reformers had hoped to create one during an overhaul of China’s corporate insolvency laws, which was completed in 2006. In the end lawmakers balked, fearing it would encourage the country’s legions of debt-dodgers.
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