Police have begun arresting entrepreneurs who have gone into hiding to avoid repaying bank and informal high-interest loans, as authorities move to control the debt crisis in East China from spilling into social unrest, local officials said Tuesday.

Rao Dawei, a shoe factory owner who employs 60 workers, was the first Wenzhou businessman hunted down by police. The recent debt crisis, precipitated in part by the country's monetary tightening, has sent shock waves through the city.

Local officials said Rao fled owing 800,000 yuan ($125,520) to upstream suppliers and 200,000 yuan in employees' wages. He was caught in his home province of Jiangxi on October 18, four days after he sold factory equipment and secretly ran away with his girl friend.

Rao is just one of the more than 90 owners of small- and medium-sized enterprises (SMEs) in Wenzhou who have disappeared or declared bankruptcy to invalidate debts owed to individual creditors pooled from the informal lending market. Fearing their wages wouldn't be paid after their bosses fled, employees have taken to the streets to protest.

Local officials said they were trying to prevent indebted bosses fleeing abroad. Many factory bosses were believed to hold foreign passports.

Private enterprises are a critical part of Zhejiang's economy, accounting for about 70 percent of GDP and employing 90 percent of the workforce.