Two years ago, as she walked down a hospital corridor handcuffed and handcuffed to get tested for Covid, Sun Junli felt embarrassed and defeated. At 45, she had come a long way. The poor village girl in northwest China had become a successful businesswoman.
Then she was crushed.
In 2018, state-owned banks abruptly stopped lending to her company, a cafe-restaurant chain, and the pandemic devastated her cash flow. By May 2021, Ms. Sun had lost her restaurants and was in detention for 16 days for owing her employees approximately $28,000 in wages.
Weeks after her release, a court would confiscate her two-bedroom apartment in Xianyang in Shaanxi province and her Toyota Camry for being insolvent, placing her on a national blacklist. She can no longer book a hotel room or plane ticket, or take out a loan.
“I’m surrounded by people like me,” she said, counting dozens of friends in difficult circumstances, entrepreneurs in fields such as fashion, energy and furniture manufacturing. “We all came from nothing and worked hard to create wealth,” Ms Sun said. “We have all lost everything and are deeply in debt.”
“Are we all bad at what we do?” she asked. “Are we all wrong?”
A few years ago, Mrs. Sun was the epitome of how small business owners, through hard work, killer instinct and luck, became the backbone of the economy.
Now she illustrates something completely different: how China, led by Xi Jinping, killed the animal spirits of the entrepreneurial class as the country demanded more state control over the economy. Xi’s government withdrew aid when business owners who needed it most punished them for risk-taking and their failures, and made it virtually impossible for them to start over.
The Chinese authorities like to call small businesses the capillaries of the economy. But years of erratic government policies, crackdowns, and blacklisting have left businesses battered or destroyed.
In 2021, when China announced its success in fighting the pandemic, the number of small businesses closing their doors outnumbered those opening, Zeng Xiangquan, a professor at Renmin University in Beijing, told an official newspaper.
Business confidence is still hurting, one of the reasons China is in an economic quagmire. Small businesses make up about 95 percent of China’s private sector, which contributes about 50 percent of national tax revenue, 60 percent of economic output and 80 percent of new jobs.
Ms. Sun’s career began in the 1990s. After dropping out of high school at the age of 17 to support her family, she worked as a farmer, textile worker, street food vendor and taxi driver. She then opened three sportswear stores selling Nike, Adidas and the Chinese brand Anta in Hancheng, a city of about 400,000 people near her village. It was 2008, the year China held its first Olympic Games, a coming-out celebration for a rising power. She would make what she called her “first bucket of gold.”
In 2013, as e-commerce began to affect retail, Ms. Sun opened Manny Coffee, a 400-square-meter café in Hancheng. It sold coffee, steak, pizza and other Western food and drinks, a novelty in the city. By 2018, it had expanded to twenty branches in six smaller cities in Shaanxi province.
When it started years earlier, Chinese banks were reluctant to lend to the private sector. Around 2015, given competition from online financial institutions like Ant Group, regulators ordered banks to lend more to small businesses.
Banks went after Ms. Sun, who borrowed $1.3 million to expand and build a central production kitchen for her restaurants. But in 2018, credit suddenly dried up. Concerned about debt, the regulators issued new guidelines instructing banks to “pay attention to the quality of loans to small businesses.”
The abrupt change has bruised many companies. The fallout became so bad that regulators began to investigate banks’ “irrational practices.”
But it was too late for Mrs. Sun. In October 2019, she borrowed money from family and friends to pay back her last bank loan, about $300,000. Her restaurants did well, with sales of $8 million in 2018. She was confident that the Chinese New Year in January 2020 would bring healthy cash flows.
On the eve of the holiday, all its branches were closed as the corona virus began to spread rapidly. The shutdown was lifted after three months, but her business never recovered. To pay rent and wages, Ms. Sun borrowed more from people around her and maxed out her credit cards. Each month she believed that the next month would be better. The government offered no help.
In November 2020, she was $1.5 million in debt and unable to continue. She completely closed the six restaurants she owned and gave up 70 percent ownership in the fourteen others, and in return her minority shareholders agreed to pay rent and wages.
China doesn’t really allow bankruptcies, which in other countries may allow business owners to pay out the money they owe.
Ms. Sun owed her 31 employees six weeks’ wages. The employees reported her to the local labor inspectorate, who handed her over to the police.
During her 16 days in the detention center, her hair turned gray. She spent most of her time meditating. The police did not release her until their investigation confirmed she had not hidden any belongings. A year later, according to a court document, the court would find “no criminal offenses” against her. But she had lost her business and her reputation.
Mrs. Sun tried to make a living by helping to manage the twelve Manny Coffee branches that were still in operation. But she was left with little work and income in 2022 due to China’s draconian ‘zero Covid’ measures. The apartment complex where she rents was locked eight times. Her brother, who delivered the meals, sometimes gave her money and brought her food.
Her father, who had lung cancer and had become infected with Covid, passed away on December 25, 2022. It was her birthday. She turned 47.
Like many Chinese, Ms Sun thought things would recover in 2023 after Covid restrictions were lifted. But that didn’t happen.
To earn a living, she tries to start a new food business. In the economic downturn, she thinks, her former clients may not want to pay $15 for steak, but might buy a bowl of spicy vegetables for $4.
She said she did not expect any financial support from the government. But she would like to get rid of the blacklist to which she was added in 2021.
The so-called dishonest list of persons was launched in July 2013, a few months after Mr Xi came to power. In March there were eight million people. According to Chinese media reports, many entrepreneurs made it onto the list, including the founders of at least 22 of China’s top 500 private companies.
“I’m not asking them to give me money,” Ms. Sun said. “But I would really like them to take my name off the blacklist so I can become a normal person and start a business again.”
“I can’t fly if I want to go to Shanghai,” she said. ‘I can’t take the high-speed train. I can’t travel. In a way, it’s no different than locking me up at home.”
