Beijing: Chinese police has started arresting owners of small enterprises who closed their units and fled after facing debt crisis that has been created by the government policy of squeeze on bank loans to tame inflation.
Unable to repay loans, some owners of small units have also reportedly committed suicide.
A top Chinese official has admitted that financial troubles have resulted in the bankruptcy of a number of units.
Zhao Hongzhu, Chief of the Zhejiang provincial committee of the Communist Party of China, has said that the recent debt crisis in the province resulted in the bankruptcy of private enterprises following which a number of owners either committed suicide or fled.
Since April, the city of Wenzhou, known for successful entrepreneurs, has been hit by a severe debt crisis.
More than 90 bosses of private companies in the city have reportedly disappeared, committed suicide or declared bankruptcy -- invalidating debts of about 10 billion yuan they owed to banks and individual creditors, pooled from the informal lending market.
Police has begun arresting entrepreneurs who have gone into hiding to avoid repaying loans, as authorities move to control the debt crisis in east China from spilling into social unrest, local officials said on Tuesday.
Rao Dawei, a shoe factory owner who employs 60 workers, was the first Wenzhou businessman hunted down by the police. The recent debt crisis, precipitated in part by the country's monetary tightening, has shocked the city.

Local officials said Rao fled, owing 800,000 yuan (125,520 US dollars) to upstream suppliers and 200,000 yuan in employees' wages.
He was caught in his home province of Jiangxi last week, four days after he sold factory equipment and fled with his girl friend.

Latest reports said the police began arresting those who fled. Rao is just one of the more than 90 owners of small and medium-sized enterprises (SMEs) in Wenzhou who have
The employees have taken to streets fearing their wages wouldn't be paid once their bosses have1 fled. Many factory bosses were believed to hold foreign passports.

Crisis which took due to the credit crunch created by the repeated rise in interest rates by the Chinese government to curb inflation.