BEIJING – On a breezy autumn evening in Beijing, Mr Gu An stepped out of a restaurant after splurging on dinner to impress a potential business partner.
A woman across the street recognised him and yelled: “Gu An, owe money, pay money!”
Mr Gu froze for a moment but kept walking, pretending not to hear. His business partner mumbled something about the weather to mask the awkwardness. But the damage was done. The deal Mr Gu had hoped to secure that night did not materialise.
The woman was a former employee whose wages Mr Gu still owes after his ticketing software business folded during the Covid-19 pandemic in 2020-2023. Today, he owes about 30 million yuan (S$5.6 million) in personal debts.
“If I could declare personal bankruptcy, I would gladly do it immediately,” he told The Straits Times.
Personal bankruptcy allows individuals who cannot repay their debts to enter a court-supervised process to restructure or write off part of what they owe.
If Mr Gu were in a country such as Singapore, he could have filed for personal bankruptcy and start over.
But in China, for now, there is still no countrywide legal route out although some provinces and cities have begun piloting local equivalents of a bankruptcy law.
That gap has drawn growing attention in China, where scholars, judges and policymakers – including during the country’s national parliamentary meetings in March – have renewed calls for a nationwide personal bankruptcy system to give failed entrepreneurs a legal way to start again.
China adopted an enterprise bankruptcy law in 2006, but it applies only to companies, not individuals.
Business owners who borrow in their own name, or who provide personal guarantees for corporate loans – both a common practice in China – remain personally on the hook for the debt even after their firms collapse.
The issue affects a vast number of people. As at May 2025, China had about 127 million sole proprietors, many of them operating with unlimited personal liability. Together, they support nearly 300 million jobs, meaning business failure can throw entire families and employees into financial difficulties.
The risks have grown as borrowing, particularly among individuals, has surged. Research by the Chinese Academy of Social Sciences shows that China’s household leverage ratio climbed to 59.4 per cent of gross domestic product in 2025, from less than 5 per cent at the start of the century, raising the chances that individuals can fall into debt with no clear way out.
Professor Zhou Li’an, an economist at Peking University and a government policy adviser, said China needs a nationwide system to allow those who are “honest but unfortunate” a chance to rebuild their lives, rather than remain burdened by debt indefinitely.
“In a mature market economy, there must be both a way to enter the market and a way to leave it,” he said at a seminar in Beijing.
