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Chinese credit card debt mounts

The number of credit cards in China have jumped in years.
The number of credit cards in China have jumped in years.
  • Although Chinese credit card debt is far behind the U.S., it's beginning to mount
  • New credit cards jumped 32 percent the past year
  • Chinese card debts more than two months overdue rose 133 percent this year
  • China
  • Business
  • Hong Kong

Beijing, China (CNN) -- The world economy is placing a bet on its future with China, but some Chinese are placing bets on their future with plastic.

In rebalancing the world economy, analysts have said U.S. citizens should take cues from the Chinese, where 40 cents of every dollar of disposable income is saved, compared to 3 cents of every dollar in the U.S.

But there are worrying signs in China that some young consumers are starting to emulate the worst habits of U.S. consumers -- like 27-year-old Yuan Shuai in Beijing, whose credit card bets on his future have turned into overwhelming debts. In the last two years, he got seven cards from seven banks and wracked up $29,000 in debts.

"I spent money on eating and having fun," he said. "That's all."

Unemployed and studying to be a taxi driver, Yuan now has debt collectors from banks turning to his father, Yuan Yizhong, for bill payment. "The banks told me they could lend to him because he's an adult," his father says. "Now they hold me responsible and threatened me."

With no laws for bankruptcy protection in China, those threats can be real. "If you cannot pay it back you either have to go to parents or friends to pay back for you, or you got to jail," said Yeongwen Chiang, a consumer expert.

Credit card issuance is up 32 percent in China in the past year, according to China Market Research and the National Bureau of Statistics. Credit card debt is up more than 130 percent to $838 million. That still pales compared to U.S. credit card debt, but the quick rise have some observers alarmed.

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With the decrease in exports during financial crisis, China has been working to build domestic consumption, offering subsidies on cars, home appliances and other big ticket items. That has helped China to continue to grow through the recession. During the October holiday week celebrating the 60th anniversary of the People's Republic of China, Chinese poured $83 billion into the economy - a 20 percent increase in spending from the same holiday period last year.

By comparison, retail spending in the United States fell 6 percent in September compared to the same time last year.

But some of the increased spending in China is with money the consumers didn't have. In the first six months of this year, the number of Chinese consumer with credit card debts more than two months overdue rose 133 percent.

For the Yuan family, credit card debt will take years to pay back. "I have only one son, and he failed to live up to my expectations," Yuan's father said.

CNN's Emily Chang, Fareed Zakaria and Kevin Voigt contributed to this report