Business Daily (BBC World Service)

Episode: Can China’s debt problem be solved?
Date: October 19, 2025
Host: Ed Butler

Overview

This episode of Business Daily delves into the growing problem of personal and household debt in China, the societal and economic consequences, and the policies being discussed by the Communist Party as it prepares its latest five-year economic plan. Via personal stories of Chinese citizens grappling with unmanageable debt, insights from economists, and government perspectives, the episode asks whether China’s debt crisis is manageable—or a sign of more troubling economic fundamentals.

Key Discussion Points & Insights

1. The Reality for Debtors in China

• Personal narratives illustrate the immense pressure faced by indebted Chinese citizens and entrepreneurs, exacerbated by post-pandemic economic sluggishness.
• Legal and social repercussions for those in default can be severe, including travel restrictions, loss of professional status, frozen assets, and even detention.

Notable Story: Mr. Lin (Shanghai business owner)

• Ran a content innovation company that thrived prior to COVID-19, only to be devastated by the pandemic's economic fallout. (02:30–04:11)
  • "The pandemic made it impossible to operate normally. No classes, no income. But we still had to pay rent and staff salaries." — Mr. Lin (03:08)
  • "Our total debt was close to $3 million ... I personally guaranteed a $300,000 bank loan. So that made me personally liable." — Mr. Lin (03:26)
• Labeled as “Lao Lai” (dishonest debtor), Mr. Lin faced loss of mobility and spent time in jail for inability to repay (03:57–04:35).
  • "I can't take high speed trains or flights, can't stay at luxury hotels, and I can't serve as a company shareholder or executive. I have no income, so I couldn't repay the debts I'd personally guaranteed." — Mr. Lin (03:57)
  • "Seven or eight people sharing a 20 square meter cell ... living and sleeping there for 15 days." — Mr. Lin (04:35)
• Courts often struggle to differentiate between those genuinely unable to pay and those willfully refusing (05:14).

Notable Story: Ms. Wang (restaurant chain owner)

• Business destroyed by 2022 Shanghai lockdown; trapped in the system and blacklisted.
  • "They want me to carry out normal business activities to repay the debt. But how can I repay such a large debt if my money is frozen?... It makes me feel powerless, unable to do anything." — Ms. Wang (05:52)

2. The Scale of the Problem

• Household debt and the number of people in arrears have sharply increased, potentially affecting 25–34 million Chinese citizens (06:30).
• Debtors’ rights and the scope for bankruptcy resolution are limited, with persistent stigma and legal consequences.

3. Official Versus On-the-Ground Perspectives

• Government & Pro-Government View:

  • Former government advisor Henry Wang maintains the issue remains “manageable” given China’s high national savings rates and a variety of stimulus policies and infrastructure projects in the works (07:00).
    • "China has grown into a more mature economy... there’s a big room to tap into [savings]. The government is in process of doing that." — Henry Wang (07:00)

• On-the-Street Reality:

  • Many business owners, like jewelry store managers, report plummeting sales and unstable job markets (07:54).
    • "The business dropped significantly for sure. There are few people coming to buy... there's no steady source of income." — Jewelry store owner (07:54)
  • Consumer confidence remains weak. Box office receipts—a key cultural indicator—fell 13% compared to the previous year.
    • "China ended with one of its weakest box office showings in recent years, down 13% from a year earlier." — Kerry Allen (08:18)
  • Retail and catering sales grew only 2.7% year-on-year, half of last year’s rate (08:18–08:50).

4. Younger Generations and Job Security

• Young Chinese face job insecurity, gig-economy instability, and real anxiety about their financial futures.
  • "There is a lot of job insecurity especially as well now when we're starting to see a change in the way that people earn money ... Jobs that they might do for a bit and they don't know how secure they are." — Kerry Allen (09:02)

5. Stimulus Measures and Consumption Boosts

• Local governments and businesses have responded with deep discounts and festivals (e.g., Singles Day moved forward, hotels discounted up to 60%) to spur spending (09:34).
  • Some ordinary consumers view these periods as a “bonanza”—but the underlying weakness persists.
  • "A ticket to the scenic spot can also be used to have a local specialty sandwich for free. There are two of us, so we have two tickets for exchanges, which is a very considerable discount." — Consumer (10:21)
• Aggressive discounting, however, carries risks of a “deflationary spiral” as firms take losses and consumers expect ever-lower prices (10:33).

6. Economist Analysis: Policy Dilemmas

• George Magnus (China Centre, Oxford University) is skeptical of the government’s focus on high growth targets and industrial policy. He critiques the lack of true household stimulus or reform.
  • "My hunch is that they're going to double down on what they're doing already, which is unrealistically high growth rates, industrial policy at the expense of economic reform and household stimulus and so on. I don't really see any real signs of change." — George Magnus (14:20)
  • "They have this view, it's a very kind of Leninist view, that ... making society richer is just to make more stuff ... the belief is that if you emphasize production and supply enough, then all the benefits will trickle down. ... Lots of economists actually think this is flawed." — George Magnus (15:13)
• Argues that true reform would require “transfer of wealth and power” from state to households—something politically anathema to the Communist Party (16:29).
  • "To boost a consumer economy they need a liberal economy ... Politically I think that's where the blockages really lie." — George Magnus (17:33)

7. Prospects For Reform & Optimism

• Henry Wang is more optimistic, arguing that growing the services sector and urbanization reforms could provide fresh growth if barriers (like the urban hukou system) are relaxed (17:53–18:41).
  • "If they can really break that [hukou] barrier, you can expect...another boom..." — Henry Wang (17:53)

8. A Resilient Spirit

• Despite immense setbacks, individuals like Mr. Lin remain determined.
  • "I'm hopeful. ... We just haven't found the right business model yet. But gradually we're getting close to it. Once we do, the debt won't be a big problem ... Tens of millions aren't a lot in my line of business, but if it fails, even a few thousand can crush it." — Mr. Lin (19:18)

Notable Quotes & Memorable Moments

• Mr. Lin, on the system's harshness:
  "Courts struggle to decide who won't pay and who can't pay." (05:14)
• Ms. Wang, on being blacklisted:
  "I would definitely pay off my debts, but I really don't want to continue to be blacklisted like this. It makes me feel powerless, unable to do anything." (05:52)
• Kerry Allen, on young people's struggles:
  "There's a real insecurity about long term saving and job security." (09:02)
• George Magnus, on economic policy:
  "To boost a consumer economy they need a liberal economy ... Politically I think that's where the blockages really lie." (17:33)

Important Segment Timestamps

| Timestamp | Segment | Speaker(s) | |-----------|--------------------------------------------------------------|--------------------------| | 01:08 | Episode introduction: Deflation and household debt context | Ed Butler | | 02:30 | Personal story: Mr. Lin’s business, bankruptcy, legal issues | Mr. Lin | | 05:31 | Personal story: Ms. Wang, restaurant struggles post-lockdown | Ms. Wang | | 06:30 | Data and scale of household debt crisis | Ed Butler | | 07:00 | Government perspective on debt manageability | Henry Wang | | 07:54 | On-the-ground perspective from business owners | Jewelry Store Owner | | 08:18 | Economic indicators: box office, retail and catering sales | Kerry Allen | | 09:02 | Young people, job insecurity and gig economy | Kerry Allen | | 10:33 | Consumer reactions to retail discounts and events | Several, Ms. Wang | | 11:06 | Impact and potential dangers of heavy discounting | Charles de Palette | | 12:50 | Setting the five-year plan and industrial policy | Ed Butler | | 13:43 | Industrial policy critique and consumer neglect | George Magnus | | 14:52 | Why China neglects household stimulus | George Magnus | | 15:13 | The philosophical divide with western models | George Magnus | | 16:29 | Reform obstacles and political considerations | George Magnus, Ed Butler | | 17:53 | Optimism from the government adviser | Henry Wang | | 19:18 | Mr. Lin's resilient outlook | Mr. Lin |

Episode Takeaways

• China’s household and SME debt crisis is not just economic but deeply personal, as millions struggle within a rigid, frequently punitive system.
• Official optimism and stimulus do exist but are often undermined by sluggish recovery, consumer pessimism, and a focus on industrial over household policy.
• Reform toward a more consumer-driven economy may be needed, but political and ideological barriers persist.
• Despite these challenges, the resilience of Chinese entrepreneurs and workers remains a hopeful theme.

For listeners seeking to understand both the lived experience and high-level policy dilemmas of China’s debt challenge, this episode offers a multifaceted and insightful overview.