Beijing orders freeze on larger state bankruptcies
In an indication that Beijing is now seeking to backpedal on crucial industrial reforms in order to keep social unrest at bay, China has ordered a virtual freeze on the bankruptcy of its larger state-owned enterprises
Unnamed sources from within the government said the supreme court has instructed provincial courts not to proceed with bankruptcy cases of state-owned enterprises with assets of more than Rmb50m ($6m) unless they have supreme court approval.
The order, which has not been publicly announced, looks likely to disrupt what is widely regarded as one of China's most pressing requirements - the liquidation of tens of thousands of inefficient, overstaffed state enterprises that absorb vast quantities of state credits without any prospect of repaying them. Within the Chinese banking system, non performing loans officially account for around 30% of total assets.
However signs of slowing growth and the civil unrest that might result from mass layoffs appear to have given China’s leaders cold feet. This is in spite of the urgency injected into the domestic reform process by the prospect of China joining the World Trade Organisation late this year or early next. Chinese gross domestic product expanded by 7% in the third quarter of the year – the country’s lowest quarterly expansion since the Asian financial crisis of 1997-98.
