Tags: China | Bankruptcy | Economy | Zombie Companies

FT: China Bankruptcy Cases Surge as Economy Slows

FT: China Bankruptcy Cases Surge as Economy Slows

 (DPC)

By    |   Monday, 27 February 2017 01:22 PM

 

Bankruptcy cases reportedly have surged in China as a sign of mounting economic stress.

Chinese courts accepted 5,665 bankruptcy cases in 2016, up 54 percent from the year before, the country's top court said Friday. About 3,600 of those cases were resolved, with 85 percent of the resolved cases resulting in liquidation.

The spike is also seen as “progress in the ruling Communist party's efforts to use the country's courts to deal with indebted 'zombie' companies and reduce industrial overcapacity," the Financial Times reported.

"It is linked to getting rid of zombie companies and making the economy more efficient," Susan Finder, law scholar in residence at Peking University's Shenzhen Graduate School, told the Financial Times. "Provincial courts state this when they report the number of bankruptcy cases. The idea is to save the companies that can be saved and liquidate the ones that can't."

To be sure, a regulator said Sunday that China needs to do more to stop risky behavior in its stock market, following a 2015 collapse in share prices and complaints investors are engaged in a dangerous new round of speculative buying.

Regulators need to stop "blind expansion" by financial firms, the deputy chairman of the China Securities Regulatory Commission, Li Chao, said at a news conference, the AP reported.

People in financial industries have warned insurance companies and others are making dangerously aggressive investments in stocks and real estate. On Friday, the chairman of a life insurer was banned from the industry for violating limits on investing.

Regulators need to "increase the intensity of supervision" and "seriously deal with illegal acts," said Li.

China's stock market is one of the world's biggest but prices are volatile and complaints of insider trading and other abuses are common. The markets are largely sealed off from global capital flows but Beijing is gradually easing barriers to foreign investors owning Chinese stocks.

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Bankruptcy cases reportedly have surged in China as a sign of mounting economic stress.
China, Bankruptcy, Economy, Zombie Companies
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2017-22-27
Monday, 27 February 2017 01:22 PM
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