Amid economic woes and high unemployment, China faces a burgeoning issue: a rapidly growing population drowning in debt. As reported by Voice of America (VOA), the number of loan defaults has spiked to record heights, prompting authorities to blacklist 8.54 million individuals from essential activities like transportation and online payments.
This figure, equivalent to 1% of working-age adults, marks a stark rise from 5.7 million defaulters just two years ago. The shift towards cashless transactions, spearheaded by platforms like Alipay and WeChat, has exacerbated the situation, leaving many defaulters struggling to fulfill basic needs. Blacklisting further compounds their hardships, restricting access to loans and even government jobs.
Zhang Congzhi, a Changsha businessman, exemplifies this plight. Easy access to online loans two years ago led him down a spiral of debt exceeding $13,700, with no clear path to repayment. He is among millions caught in a similar quagmire, having borrowed to navigate the economic turmoil caused by the pandemic and strict lockdowns.
Banks, however, remain cautiously selective. Lu Xiaojuan, a banker in Jinan, notes that the lack of collateral, like houses or cars, bars most individuals from direct loans, leaving them vulnerable to predatory online lenders and credit cards. This, coupled with rising consumption outpacing income growth, fuels financial imprudence, as Li Zhaobo, an honorary research fellow at Hong Kong’s Chinese University of Hong Kong, observes.
Compounding the problem is the collapsing real estate sector, a long-standing engine of China’s economic growth. The downfall of giants like Evergrande and Country Garden has disrupted cash flow, leaving many struggling homeowners burdened by hefty mortgages. Private loans, once a lifeline for businesses, have also dried up due to the pandemic and the U.S.-China trade war, further exacerbating the crisis.
China’s economic recovery hinges on addressing this burgeoning debt burden. Failure to do so risks not only individual hardship but also broader economic instability.
