CHINA> Regional
Deadbeat debtors buying border troubles
By Zheng Caixiong in Guangzhou and Li Xiaokun in Beijing (China Daily)
Updated: 2009-09-15 06:47

Foreigners and locals who fail to pay off their business debts in Guangdong province after being ordered to do so in court may find their way out of China blocked at the border, thanks to a new regulation.

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The rule, drafted by Guangdong High People's Court and Guangdong Provincial Department of Public Security, makes it possible to prevent heavy debtors from leaving the mainland.

It gives police officers the power to stop people at customs checkpoints if the deadbeat, or Laolai - a derogatory term in Chinese used for diehard debtors - tries to leave the country.

Guangdong was the first province in China to introduce such legislation. It came into effect on Monday and applies to both Chinese citizens and foreigners.

Any bad debtor from Guangdong who tries to leave China from other cities, such as Shanghai or Beijing, will find their way blocked there also because monitored names will be shared by police nationwide, an unnamed press official from the court told China Daily.

Monitored debtors who have left China will not be allowed to return until they have cleaned up their finances, he added.

The new regulation allows police officers to seize the travel documents of deadbeat debtors and impound their vehicles at any location.

Zheng E, president of Guangdong High People's Court, said the new cooperative mechanism aims to restrict the growing number of bad debtors in the southern province that borders Hong Kong and Macao.

Guangdong, one of China's economic engines, is also one of the bad-debtor blackspots.

Some years ago, Guangdong banned bad debtors from taking air trips, living in hotels with three stars or more and visiting saunas and other luxury entertainment venues.

Chen Huajie, executive vice-president of Guangdong High People's Court, said at least 1,200 bad debtors pursued by the courts have been detained this year. The court has also made public the names of more than 300 deadbeats.

"Many bad debtors refuse to pay their debts, even when they have lost lawsuits," Chen said. And the courts had no idea when people left the mainland and transferred or sold properties.

"The new mechanism will certainly help deter the business people who want to repudiate their debts. It will force them to follow laws and honor their business contracts," Zheng E said.

A high-level officer from the economic criminal investigation department, under Guangdong provincial bureau of public security, said provincial police wanted to help.

"The new regulation will certainly help prevent bad debts and contribute to ensuring a good business environment in Guangdong," said Li Chengzhong, a local business executive. He said it was good news for law-abiding business people.

Other courts around the nation have taken steps to reel in bad debtors.

In Shinan District of Qingdao, Shandong, the names and addresses of 60 debtors were made public this month.

Qu Xijiu, a professor with China University for Political Science and Law, applauded the efforts in Guangdong.

"It reflects the fact that the local government does not leave legal enforcement solely up to the courts but accepts it is also the job of government. The courts can sometimes be too weak to shoulder the tasks," Qu said.

But he did not think all provinces in China should follow Guangdong's lead.

"It should depend on the local situation, such as how closely the government is working with the courts, and how strongly they would like to work together," he said.

Inadequate enforcement has long troubled the courts.

In late 2005, the central government established a "deterring" mechanism, that involves a database of information from convicted people's banks, commerce, real estate, custom, project bidding and vehicles information.