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　　World heritage sites such as Pingyao are facing the dilemma of how to balance preservation and commercialization
　　
　　
　　FINANCIAL DOWNTURN: Individual bankruptcies may be caused by various factors, but over-consumption is considered the biggest problem
　　
　　Chen Jie recently gained admission to a university to study for a master’s degree after two years of a difficult life in Beijing. During that time, he earned a living through hard work while continuing to study. But he also received a court ruling requiring him to repay the debts he incurred in obtaining his bachelor’s degree, which made him quite upset.
　　Chen comes from an isolated village in west China. His younger brother had to drop out of school and began work at the age of 19 to make ends meet for the whole family, which has income of less than 1,000 yuan a year. The biggest motivation for the family was Chen Jie’s good performance at school.
　　Strained by the large spending on education costs, the young man applied to the bank to defer payments on his student loans, but was refused. Pressured by the due payments and new education expenditures, Chen took the Beijing Xinjiekou Sub-branch of the Industrial and Commercial Bank of China to court, anticipating a ruling in his favor, but he lost the lawsuit.
　　Given his financial situation, Chen conceded that he is actually insolvent. However, since China has no legislation recognizing his failing status, Chen is unable to legally appeal to the bank to write off his debt or agree on a debt restructuring.
　　Chen is not alone in this financial “limbo,” as the number of people who are unable to repay their debts grows.
　　While China now has only a corporate bankruptcy law, which is being revised, some experts argue that a law governing individual bankruptcy is becoming increasingly urgent. The issue has been mired in controversy, however, and the government is continuing to study the situation.
　　
　　Lack of knowledge
　　
　　Even if many Chinese people are troubled by debts that far exceed their ability to repay, they still have little knowledge of individual bankruptcy, compared with corporate bankruptcy.
　　Take the case of Wang Qi. After resigning from a state-owned company in 2002, Wang did freelance work. She found that making her monthly housing loan payment became very difficult.
　　“I had a stable income at my position before, and could easily meet the 2,500-yuan monthly payment on my 300,000-yuan, 20-year housing mortgage,” Wang said. “But now I feel increasing financial pressure from the ups and downs in income after becoming self-employed. Will the banks take back my house when I am insolvent?”
　　According to foreign laws in this regard, if a person is incapable of repaying his/her debts, a court can either liquidate and reallocate the debtor’s property or forgive the debts.
　　One point of such legislation is that individual bankruptcy can help a person clear up old debts and start a new credit life, while the other is that creditors can be fairly compensated.
　　In the absence of individual bankruptcy legislation in China, it is often very difficult for creditors to collect what they are owed. According to the Supreme People’s Court, China’s highest judicial organ, a large number of rulings concerning individual debtors have failed to be enforced over the past few years, because the defendants lack assets. As a result, creditors find they are helpless to claim their lawful rights.
　　“Individual bankruptcy can guarantee the basic livelihood of those in debt, as well as reduce risks in the banking system,” said Yang Zhaoquan from the Beijing Huatang Law Firm.
　　He added that after applying for bankruptcy, debtors might be exempt from their liabilities, subject to restrictions on their consumption.
　　Zhao Xijun, Deputy Director of the Finance and Securities Institute of Beijing-based Renmin University of China, noted that individual bankruptcy is an important part of the market economy, and thus the public’s slowly growing understanding of this area is a sign of progress. The establishment of a bankruptcy system, in particular that of individual bankruptcy, indicates the maturity of a market and efficiency of public administration.
　　Among more than 1.6 million bankruptcy cases in the United States in 2002, individual ones accounted for almost 95 percent of the total. In Hong Kong, more than 20,000 people have applied for bankruptcy.
　　In economic theory, there is a positive correlation between a consumption boom and the number of bankruptcies. A certain number of bankruptcies points to brisk demand for credit, which can act as a stimulant to economic growth.
　　Cao Siyuan, who gained fame as a bankruptcy law expert after proposing and participating in the drafting of China’s first bankruptcy law in the 1980s, agreed with this view, saying that China should build an individual bankruptcy system to boost its consumer credit market.
　　
　　Taking action
　　
　　As early as 1994, the Chinese Government began to draft new bankruptcy legislation, to replace a corporate bankruptcy law implemented on a trial basis since 1987. Some legal experts have always suggested that individual bankruptcy should be included.
　　Tang Weijian, Associate Professor at the Renmin University of China, has taken a leading role in bringing individual bankruptcy legislation. He stressed that conditions were mature in China almost a decade ago to codify related practices, since that is necessary to deal with the growing number of failed individual businesses in a market economy.
　　Meanwhile, opponents contend that an individual could easily evade debt by faking bankruptcy or concealing property during the bankruptcy process, since China’s individual property system is still under construction. They insist it is essential to set up an individual property system before insolvent properties can be defined and liquidated, and claims can be adjudicated without dispute. Under bankruptcy procedures, properties are required to be auctioned, distributed or liquidated to clear up the debt.
　　The government has taken action by setting up some interim rules for individual bankruptcy petitions.
　　Experts also call for several other supporting and facilitating measures to push the implementation of individual bankruptcy.
　　Legal expert Li Shuguang, also a member of the bankruptcy law drafting group, noted that the establishment of a personal property registration system is a necessary first step.
　　According to Li, the property registration system could draw a line between an individual’s possessions and household property, thus enabling the bankruptcy trustee to manage the debtor’s property promptly and clearly. To some extent, such a system would also hinder debtors from unlawfully removing and transferring property.
　　In addition, there should be a nationwide credit rating system and the relevant database should be opened. Encouragingly, the central bank launched a project at the end of last year to build a nationwide network connecting databases of various banks, through which lenders can check a person’s credit information.
　　Moreover, the social security system is another vital part of the project, experts say, noting that it could provide the primary source of income to bankrupt debtors and help them make a fresh start.
　　Some experts warn that a large gap between urban and rural areas still exists in China, and individual bankruptcy should be promoted in a studied way. For the low-income rural population, automatic bankruptcy may only push them further into a corner.
　　To meet the demands of a market economy, Li predicted that China’s legislation on individual bankruptcy would gain speed on the basis of ongoing preparedness.

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