Orwellian Debt Collection in China
Trying to get a handle on the potential for a workable personal bankruptcy procedure in China, I've repeatedly encountered evidence that the most important element might be lacking: attitude. Successful personal insolvency systems around the world differ in design and operation, but the system architects and operators generally share a sense that default is an inevitable aspect of consumer/entrepreneurial risk, and mitigating the long-term effects of such defaults is good for debtors, creditors, and society. I don't get the sense, based on my admittedly superficial outsider perspective, that this foundation is ready in China. Indeed, quite the opposite.
For example, for the past few years, the Supreme People's Court has run a "judgment defaulter's list" of individuals who have failed (been unable?) to satisfy judgments against them. More than 3 million names were on this list already by the end of 2015, and getting on this list means more than just public shaming; it's also a "no-fly" list, preventing defaulters from buying airplane tickets, in addition to a "no-high-speed-train" and "no-hotel-stay" list, and also a "no-sending-your-kids-to-paid-schools" list. By mid-2016, about 5 million people had been preventing from buying these services in China as a result of being on the list. This initiative is just the start of a planned "Social Credit System," which will aggregate electronic data (including not only payment history, but also buying habits, treatment of one's parents, and who one's associates are) to produce a "social credit score" for all individuals. This score will affect all manner of life events, such as access not only to loans, but also to housing access, work promotions, honors, and other social benefits. The potential problems with data integrity (including inaccurate data), among many other challenges, are discussed in this fascinating paper by Yongxi Chen and Anne Sy Cheung of the Univ. of Hong Kong.
There may be more nuance here than I can access now, but treating all judgment defaulters as morally culpable fiends who should be punished is ... a bit outdated. Though it's dangerous to draw parallels to China's imperial past, I can hardly resist observing that bankruptcy for nearly 300 years of Qing rule up to the 20th century was a crime, punishable by an escalating number of blows of a bamboo cane depending upon the size of the defaulted debt (discussed at pp. 18-19 of this excellent thesis). Discharge does not seem to have been considered, as in pre-modern England, as a method of enticing debtors to reveal the location of their assets or mitigate the effects of economic volatility. Again, I'm not sure it's fair to equate pre-modern ideas about financial distress with 21st century attitudes, but I'm not enthusiastic about what seems to be the absence of a rehabilitative perspective on defaulting debtors in both old and new China. Comments from those who know more than I are enthusiastically welcomed!