Founder of Chinese smartphone maker Smartisan added to debt blacklist

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The high-profile founder of struggling Chinese smartphone maker Smartisan has been placed on an official blacklist for debt defaulters, which bars him from spending on travel and other major purchases, a local court document showed.

Why it matters: The public debt blacklist, maintained by China’s top court and including contributions from municipal-level courts, is part of the country’s growing push to curb nonperforming loans.

  • Some 3.6 million entities were placed on the blacklist in 2018, according to a report (in Chinese) released by Credit China, the governmental website which hosts the debt blacklist.
  • Founded in 2012, Smartisan was never able to distinguish itself in China’s fiercely competitive smartphone market. In the six years since it was founded, the company has sold only around 3 million smartphones, in sharp contrast to top-performing Huawei, which shipped 35.2 million units last year alone.

Details: Beijing-based Smartisan, along with its founder and former CEO Luo Yonghao, were put on the blacklist for defaulting on payments toward RMB 3.7 million (around $527,000) of debt owed to Jiangsu-based electronics suppliers, according to a consumption restriction order by a local court published on Sep. 24.

  • The order also bars Luo from spending at luxury hotels, night clubs, and golf clubs, or going on vacation. Any violation will lead to fines or detention, according to the order.
  • In a statement posted on his social media account, Luo apologized to his creditors and promised to pay off all his debt in the future.
  • The serial entrepreneur, who is also known for his stand-up comedy episodes that earned him early popularity, vowed that he would become a street performer to clear his debt if he had to.

Context: Beijing-based Bytedance licensed in January a number of Smartisan’s patents to ramp up its online education business. The TikTok owner also recruited dozens of employees from Smartisan later that month.

  • In March, it was reported (in Chinese) that Smartisan has ceased research and development because of sagging smartphone sales.
  • The company confirmed last November that it was suffering from cash flow problems, leading to difficulties paying salaries giving rise to plans to lay off as much as 60% of employees.