Runaway borrowers the new face of China’s personal credit boom
Loans with high interest rates and penalties for delinquency now a burden for parents and siblings
With China preparing its annual blueprint for tackling its economic challenges, the South China Morning Post has sent journalists to check on three of the ‘grey rhinos’ threatening the world’s second biggest economy. In the second story in the series we look at China’s consumer credit bubble.
China’s online lending boom has sent a steady stream of new clients to Guangzhou lawyer Luo Aiping in recent months: the parents and siblings of young men trapped or ruined by usurious debts.
“These young men, the son or the brother in a family, are actually subprime borrowers with little in the way of savings and no assets,” Luo said. “They’ve recently been encouraged to access a dizzying array of online microcredit platforms to fund their own consumption and have cared little about the exorbitant interest rates.
“Now they’ve run away from their creditors and left behind big troubles for their parents, who are not wealthy.”
Zeng Hong, from Hunan province, is a typical client. She went to Luo for help because she had been harassed by calls from debt collectors for months after her 27-year-old brother ran away, leaving behind a two-year-old son and more than 300,000 yuan (US$45,400) in debts.
Zeng wanted to help repay her younger brother’s loans, but 300,000 yuan is a big sum for a poor family and her husband strongly opposed her plan. She approached Luo to ask whether the debts and interest her brother had incurred were legal.