▶ Banned from riding the train for debts. The Chinese do not spend, they are afraid of harsh punishments — ČT24 — Czech Television

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Events: Harsh punishments for debtors in China (source: ČT24)

Chinese leader Xi Jinping arrived in Europe on Sunday. Among other things, economic problems at home lead him to the old continent. Chinese household debt has halved over the past five years, while domestic consumption, one of the pillars of the world’s second-strongest economy, is falling. Beijing would like people to spend more, but authorities blacklist borrowers with a range of punishments, such as being banned from traveling by train or plane. The Chinese are so afraid.

Liang, a Chinese beautician who moved to the city for work at the age of sixteen, also made it to the list of debtors. But the dream of a better life soon disappeared in debt. She was tempted by loans and in four years she paid more than double the original amount.

With a salary of sixteen thousand crowns a month, she is up to her ears in debt and is being chased by debt collectors. “I have already paid (in conversion) 180 thousand crowns. I calculated that the annual interest is 55.07 percent. But the contract was 21 percent per year and 1.75 percent per month. The rest is done by other deductions such as ‘flexible package’, account management and so on,” says the beautician.

Chinese authorities are confiscating debtors’ salaries, restricting access to government jobs, banning travel by high-speed train and plane. Those who do not comply may be arrested.

Violence and intimidation

Unlike other countries, China does not allow them to declare bankruptcy and continue their lives. “Forcible collection of claims related to private and online loans has been on the rise in recent years. Violence, threats and intimidation are common. They call not only debtors, but also friends and family members,” pointed out the lawyer of foreclosure victims Yao Ch’tou from the JINGSH law firm in Beijing.

China’s household debt has halved in five years to around eleven trillion dollars. Debts also increased due to the boom in the real estate market. Many Chinese borrowed money for housing, or speculated and bought apartments for investment, only to find them empty. The real estate boom is over, prices are falling, and many people are stuck in debt they can’t handle.

The state wants the Chinese to spend more, but the threat of punishment leads families to hold back. Retail sales rose 4.7 percent in the first quarter, missing expectations. Luxury brands report weaker sales. Due to weak domestic consumption, the government encourages production development and exports, leading to overproduction and exacerbating trade disputes with the West.