CHINA: The gentle art of debt collection

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The gentle art of debt collection

Thursday, January 20, 2000 MARK O'NEILL

If China's most famous debt collector made a film of his life, it would be like a James Bond thriller. Last year, the head of a private firm in Zhejiang agreed to pay him an overdue debt of 480,000 yuan (HK$450,000) - but in cash, not by cheque.

"I smelt a rat at once," said Yang Li, a small, slim man with a goatie beard, sitting in his spartan office in a dowdy skyscraper in Chengdu, capital of Sichuan province in southwest China.

"He gave me cash because he planned to seize it back. I carried the suitcase with the money into a taxi and told him to drive as fast as possible, to evade my pursuers. I changed taxis twice, in sidestreets where they could not see, and gave the money to the man from the firm owed the money.

"Without going back to my hotel, I took another cab and paid the driver 1,000 yuan to drive 200 kilometres to another city, where I took the train home. My pursuers were waiting for me at the airport," he said.

Since he set up his business last February, Mr Yang has recovered 4.5 million yuan for his clients, succeeding in 13 out of 16 cases. He has received frequent death threats and served 15 days in a detention centre in Guangzhou in September after being arrested for "disturbing court proceedings".

He also runs the risk of having his firm closed. Debt collection was banned in May 1993, after agencies set up by the police and the courts arrested and kidnapped debtors to obtain repayment.

So his business licence mentions nothing about collecting money but says that it was set up to provide advice and information to companies. There is no question of the enormous demand for the services provided by Mr Yang and his competitors. Non-payment of debt is chronic on the mainland, with estimates running into tens of billions of yuan owed between companies.

"While the state bans debt collection, all kinds of firms offering this service have appeared recently," commented the Economic Information Daily this month. "The economy is weak, many companies cannot pay their debts. The level of trust in society is falling and even well-known firms with a good reputation are not repaying. Legal enforcement is weak - you win a case in court for repayment but do not get your money."

It is these reasons that are driving the growth of the business.

"People think that the more you borrow, the smarter you are," Mr Yang said. "In the planned economy, all the assets belonged to the state, so what was the problem with debt? It was out of one pocket and into another."

One way to collect debt is to hire gangsters to get it for you. The risk is that they may end up taking your money as well.

Mr Yang uses more orthodox methods. While he is chasing the debt, he becomes an employer of the creditor firm which gives him a power of attorney that is the legal authority to pursue the claim.

Mr Yang says that he does not use gangsters, has no bodyguard and carries no weapons. "I am a small man, only 1.6 metres. I never use violence, but guile. I work out my strategy by analysing the psyche of the other side and will attack his psychological weakness."

Last December, for example, he went to collect a debt from the general manager of an industrial firm, who said he could not pay at once.

"I found he had a restaurant that was doing good business. I hired 20 migrant workers and paid them 100 yuan a day to beg inside the restaurant each day. He put up with it for two days but on the third day, he lost patience and paid me the 480,000 yuan he owed, to get rid of them."

In another case, he was hired to collect more than 100,000 yuan from a powerful man in Sichuan with good contacts in the police and local mafia.

"He made it known that he would break my leg if I dared to go. He is a very vicious character. So I arranged for two women to go instead. They put sponge under their dresses to look as if they were pregnant and had tao zhai [collect debt] sewn in big characters on the front of the dresses.

"They walked through the town to his office, attracting a big crowd. He could not beat up pregnant women and did not want to lose face in front of his community, so he paid up."

In another case, he sent elderly women to sit in the office of the manager of a firm owing money. They posed as mothers of workers laid off by the creditor firm who had received no pay because of the lack of money. "They played stupid and not understanding what people said to them. How can you throw out women in their 80s?"

Mr Yang has also made good use of the media as a way to put pressure on the debtors. When he stood at the gate of a factory with a band with the words "collecting debt" over his chest and handed out leaflets with details of the debt, he made sure a television crew was there to cover the event and protect him.

He boasts of having appeared in 500 newspapers, magazines and television programmes during the past year.

One assignment was to collect 280,000 yuan from a department of the government in Chongqing city that had owed the money to a Chengdu firm for six years. He publicised the debt to the extent that the head of the Chongqing propaganda department ordered media in the city not to report it.

Banned from the local media, he managed to persuade the Chengdu press to cover the case and eventually extracted the money by persuading officials that to let it remain unpaid would hurt the city's investment image.

Another clash with officialdom, last September, led to 15 days in a detention centre in Guangzhou. He was in the waiting room of the city's Baiyun district court, where a case involving one of his debtors was in progress, when he was arrested "for disturbing court proceedings".

He denies doing any such thing and said he was waiting quietly for the verdict. He had publicised the event so successfully that central television was waiting for him when he was released and made a 30-minute programme about his detention and the issue of debt collection.

In the programme, two reporters with him in the waiting room supported his assertion that he was not interfering with the proceedings. A court official attacked Mr Yang, saying his activities interfered with the enforcement of court decisions ordering repayment of debt - to which Mr Yang replies that court decisions are not enforced and creditors do not get their money back.

"In the detention centre, I sat with my legs crossed with 10 to 20 other people in the room. We were not allowed to move. It was only after five o'clock in the evening that we were allowed to read a newspaper," he said.

But all these exploits have brought Mr Yang little reward. He has no secretary and his office consists of two rooms with a sofa, a desk, two telephones, a computer and copies of the mainland's laws, manuals from Harvard Business School, and Law Of Success by Napoleon Hill.

He rents a small flat nearby with his wife and three-month-old baby, with a leather sofa round the mahjong table, and travels in a ricketty green minivan.

The irony is that, while he earned 4.5 million yuan for his clients, he has not received the payment he is due. "Last year I earned 20,000 yuan gross but overall made a loss. I helped the companies and their laid-off workers and earned revenue for the state - but got little for myself."

What he does have is his name. "A private firm in Chongqing offered to buy me out for five million yuan, but I refused. I am considering an offer from a Guangzhou company to produce toothpaste and a range of cosmetics under the Yang Li brand."

Still, it is a world away from the dirt-poor village in eastern Sichuan where he was born in 1964, the only surviving child of a family with 0.04 hectares of land and a wooden house of 10 square metres.

His father built railway lines and worked in the Panzhihua steel mill, earning 20 to 30 yuan a month. "We raised one pig. More than one would have been capitalist. I killed my first pig when I was six.

"I attended primary school for five years but the teacher was often absent, digging the fields," he said. "There was not much teaching."

After one year at secondary school, he was expelled when the principal caught him and another boy smoking a cigarette butt. "He ordered the two of us to swallow a cigarette as punishment. My classmate did and was sick but I refused. The principal told me to do a self-criticism but I would not."

He learnt carpentry and in 1986 went to his father's steel mill where he worked as a builder for four years. After a divorce from his first wife in 1993, he came to Chengdu where he worked in a photographic shop for six months, sleeping on the floor.

Then he worked as a photographer and reporter with local newspapers before moving in 1996 to a trading firm, where he sold Japanese auto components, clothes and electrical appliances. The firm was later closed for tax evasion. He started his own photographic business but it failed.

In 1998, he opened a karaoke parlour with one room and 20 seats from which he earned 2,000 to 3,000 yuan a month.

In the autumn of that year he started collecting debts for China Unicom, a telephone company, and found that he had a flair for it, which persuaded him to start his own business.


Might check your exposure in stocks of companies with large Chinese investments.
Also, what will happen here if the Economy goes south?

-- Possible Impact (posim@hotmail.com), January 19, 2000

Answers

Speaking of debt collection, I believe Pres. Klingon may owe something further to the Chinese .....

-- Squirrel Hunter (nuts@upina.tree), January 19, 2000.

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