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People's Daily Online>>China Business

Chinese courts urged to handle private loan cases properly

(Xinhua)

19:19, December 06, 2011

BEIJING, Nov. 6 (Xinhua) -- China's Supreme People's Court (SPC) on Tuesday issued a circular urging the proper handling of conflicts concerning private loans following a number of cases of bosses being unable to pay back informal high-interest loans, forcing enterprises to the verge of bankruptcy.

"Private loans, many of which occurred in obscurity, are very likely to create high-interest scandals, the bankruptcies of small and medium-size businesses, illegal fund collections and repayments forced by violence, resulting in personal assaults and disrupting the country's financial order," according to an explanatory document also issued Tuesday by the SPC.

Wenzhou, a city in coastal Zhejiang province that is known for booming private entrepreneurship, has been especially affected by a severe debt crisis since April.

More than 90 bosses of private companies in the city were previously reported to have disappeared, committed suicide or declared bankruptcy -- invalidating debts of about 10 billion yuan (1.57 billion U.S. dollars) owed to banks and individual creditors pooled from the informal lending market. The most recent runaway boss case occurred on October 18.

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