STACEY VANEK SMITH, HOST:
Lao Duan (ph) is 42. He lives in Shanxi province in China. The region is known for its coal. It has some of the largest, most productive coal mines in the world. And Lao Duan asked that we not use his full name because he could get into trouble with the government for talking to the media.
Lao Duan used to work in the coal industry. He was a middleman. He would buy coal from mines, like thousands of tons.
LAO DUAN: (Through interpreter) I will find a huge storage to put all the coal that I got from in there. And then I will go out to find, for example, power plant or electricity company - whoever needs the coal.
CARDIFF GARCIA, HOST:
We spoke to Lao Duan through our producer, Echo Wang. Lao Duan says coal was a good business. His deals were often worth millions of dollars. But buying and storing the coal required a lot of upfront cash.
DUAN: (Through interpreter) So I had to go to the bank or go to other people to make the loans.
VANEK SMITH: And then one day, the market for coal just dropped through the floor. The Chinese government was concerned about air pollution, and it launched a blue-sky policy, and the price of coal just plummeted.
GARCIA: Lao Duan had about $7 million worth of coal in storage at the time. Suddenly, that coal was worth only $4 million.
DUAN: (Through interpreter) That's how I went bankrupt. That's how my cash flow got cut off - because the money was just going into smoke.
GARCIA: Because the loans that Lao Duan had taken out to buy the coal and store the coal - he just couldn't pay them back. One of Lao Duan's creditors then took him to court.
VANEK SMITH: All told, Lao Duan owed $1 1/2 million to various creditors. And he told the court he just couldn't pay.
DUAN: (Through interpreter) You're automatically put on the blacklist.
VANEK SMITH: What is the blacklist?
DUAN: (Through interpreter) The blacklist, or it's called the list of untrustworthy people under enforcement by the court.
GARCIA: Bankruptcy works differently in China than how it does in the U.S. In China, if a court determines that you have the money to pay off your debts but are choosing not to pay them off, then the court will sometimes put you on the blacklist. Lao Duan insists that he could not pay the money back, but he ended up on the blacklist anyway.
VANEK SMITH: This is THE INDICATOR. I'm Stacey Vanek Smith.
GARCIA: And I'm Cardiff Garcia. China started the blacklist about five years ago as a way to infuse more trust into its banking and financial system. And part of this has involved cracking down on debtors, creating consequences for people who did not pay back their loans.
VANEK SMITH: Today on the show, what it's like to be on China's list of untrustworthy people.
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GARCIA: Today's indicator is 12 million. That is the number of debtors who have ended up on China's blacklist of untrustworthy people. That's a bit less than 1 percent of the population.
VANEK SMITH: Among them, Lao Duan. At first, he says, he was just annoyed. But he was determined to jump back into the business world, pay off the debt and get off this list.
GARCIA: The coal industry was basically dead and dying, and his whole province was struggling economically. But Lao Duan had good connections and knew something about finance and lending. He thought he would book a train ticket to Beijing, where the economy was strong, to try and kick-start a lending and finance business.
VANEK SMITH: So Lao Duan went online and booked a high-speed train ticket to Beijing. He put down his name and payment. But right away, this page popped up saying he could not complete the purchase.
DUAN: (Through interpreter) And it says that this person is on the untrustworthy list from the court.
VANEK SMITH: Lao Duan was confused. Why couldn't he book this train ticket? He started looking into the situation.
DUAN: (Through interpreter) One thing that comes along with the blacklist or untrustworthy list is that you are barred from high-end consumption, which means that you can't take a speed train, you can't fly.
GARCIA: Flying to Beijing, Lao Duan says, takes 90 minutes. But that's considered luxury travel, so he couldn't do that. He would end up, instead, taking the slow train to Beijing, which is 14 hours.
VANEK SMITH: And Lao Duan was blocked from booking a lot of hotel rooms in Beijing because that was considered a luxury expenditure. Trying to start this new business began to feel impossible.
DUAN: (Through interpreter) The way to new business has been already blocked.
VANEK SMITH: And when Lao Duan went to his bank, he found that all of his accounts and cards had been frozen.
DUAN: (Through interpreter) Their attitude towards me was like they wanted to stay away from me, so that has made me very uncomfortable.
GARCIA: And one morning, when Lao Duan was driving through the center of town, he discovered another aspect of being on the untrustworthy list. On one of the electronic billboards by the side of the road was his face.
VANEK SMITH: Just, like, up on a big billboard?
DUAN: (Through interpreter) It's a big electric screen. By the side of a big plaza, there are, like, huge screens, and they are very eye-catching. You can really see them from afar. And I saw my pictures on the screens - my picture from my ID card and my ID card number and my name.
VANEK SMITH: The billboard said, this man is untrustworthy. Lao Duan says these billboards are all over town.
GARCIA: Lao Duan says he started to feel self-conscious about it all the time. It became really hard to go out.
DUAN: (Through interpreter) Ever since that, I actually intentionally reduce my contact with the outside world. And also, I try not to go to these get-togethers with friends.
VANEK SMITH: Why do you do that?
DUAN: (Through interpreter) I feel - I'm afraid that people will look at you from - in a different way. And I don't feel confident anymore.
GARCIA: Lao Duan says whenever he went out, whenever he'd see the billboard, he would just stop and watch it for a while, scrolling through the untrustworthies, waiting to see if his face would come up. But one day when he was doing that, he saw the face of someone he knew.
DUAN: (Through interpreter) Oh, my God. This person, who used to be working in the same industry as I did, are all now up there.
VANEK SMITH: Lao Duan started to notice a bunch of his former colleagues from the coal industry were also on the blacklist.
DUAN: (Through interpreter) Most of them used to be really successful and outstanding entrepreneurs. And we're all now in this very embarrassing situation.
GARCIA: Lao Duan started calling them, saying, hey, I'm on the list, too. He started getting people together, meeting up for dinner.
VANEK SMITH: Yeah, just to talk about ways to get new business started, how to work around some of the obstacles that you face in starting a business when you're on the blacklist, and also just sharing stories about how hard it is to be on this list.
DUAN: (Through interpreter) People like us have the common language. I think we're just talking to each other also to look for some comfort - you know, psychological comfort.
GARCIA: Lao Duan says these are the only people he can socialize with and the only people he can really relax around.
DUAN: (Through interpreter) Because actually, in a society, the widespread attitude towards us is very resistant. People were saying, why are you cured being happy? Why do you still have time to be happy? Why do you not go out and make money to pay back your loan?
GARCIA: So far, Lao Duan says he has paid back about 300,000 of the $1 1/2 million that he originally owed, so still about 1.2 million to go.
VANEK SMITH: How long do you think it will take to pay off the rest?
DUAN: (Through interpreter) It's hard to say. I think maybe over two years.
VANEK SMITH: But even when Lao Duan does manage to pay off his debts, getting off the blacklist could be hard.
GARCIA: We talked to lawyers in China who deal with this. And by all accounts, getting off the blacklist, even if you've paid your debts - well, it's technically possible, but it just never seems to happen.
VANEK SMITH: We reached out to China's Supreme Court about this issue, but they didn't respond to requests for comment.
GARCIA: But Lao Duan says he will keep paying off his debt. He has to believe there's a way off this list.
VANEK SMITH: Do you ever think about what it will be like when you get off the blacklist?
DUAN: (Through interpreter) I think I will feel very relaxed. When I get off the list, I will feel there is this big stone is finally off me. I'm not an untrustworthy person, but the social pressure on me is like a big stone that I feel that, sometimes, I cannot brace.
VANEK SMITH: Lao Duan says he has to believe there's a new life he can work toward - one where he can walk down the street without worrying that he'll see his face on a giant billboard, one where he can go out and socialize - a new life where he can breathe.
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GARCIA: The blacklist is one part of China's social credit system. The full system is not set to be up and running until 2020. But there are some pilot cities that have the full program in place. Tomorrow, we talk with a resident of one of these pilot cities about what it's like to live in a place where your behavior is monitored and scored.
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