The Chinese government is tightening the noose on defaulting debtors, imposing tough sanctions that include restrictions on high-speed rail travel and luxury accommodations. This move is part of a broader crackdown on unpaid bills.
What happened: Beijing takes harsh action against those who fail to repay their debts. The measures include wage sequestration, exclusion from public jobs and limiting access to high-speed trains and air travel. According to the Wall Street Journal, some individuals are even banned from purchasing expensive insurance policies or going on vacation.
The government’s crime blacklist has grown by nearly 50% since the end of 2019, now comprising 8.3 million individuals. Courts may place people on this list if they fail to enforce judgments against them or if they are deemed uncooperative with legal proceedings.
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Unlike the United States, China does not allow most people to file for bankruptcy to clear bad debts. This policy has attracted criticism from Chinese scholars as unfair. Household debt in the country has increased by 50% over the past five years, reaching approximately $11 trillion.
The threat of sanctions for those who fall behind on debt is pushing many Chinese families to become more conservative with their money. This is impacting consumer spending and prompting praise from Western companies The Apple company. AAPL, Estee Lauder Companies HE AND General Motors GM report weaker sales in China, according to the report.
Because matter: The Chinese government’s approach to managing the country’s debt crisis has been the subject of international concern. Billionaire investor Ray Dalio warned that China could face a “lost decade” if it does not address its debt problems.
This caution has been issued in the context of a multifaceted economic environment, particularly with Fitch Ratings recently downgrading China’s credit outlook from stable to negative.
The debt crisis has been further exacerbated by the collapse of China’s real estate market, which has been compared to an “American financial crisis on steroids”.
In February, this crisis led to a $7 trillion drop, prompting President Xi Jinping to seek measures to stabilize the market and restore investor confidence.
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