Economic Information, a publication under Xinhua, reported that bankruptcies are on the rise and banks have tightened credit, adding fuel to the economic downturn.
A total of 346 bankruptcy cases have been filed in the Courts in Zhejiang Province. This represents an increase of 145.07 percent compared to the same period last year. The debt of these bankrupt companies totals more than 159.5 billion yuan. This is a six fold increase compared to the debt in 2012, which was 24.3 billion yuan.
Of the 346 cases, 198 are from companies in Wenzhou City. Closures of the companies have caused a domino effect. Among the waves of corporate bankruptcies, over 90 percent of Wenzhou credit guarantee companies have gone belly up. Wenzhou Credit Guarantee Investment Co., Ltd., the largest credit guarantee company closed its doors in July 2013.
Banks have ceased making corporate loans and have started asking for an accelerated payment of principal on outstanding loans. In Hangzhou City, Zhejiang Province, the default of one of the largest companies affected more than 600 companies because they provided credit guarantees to each other. In Xiaoshan, and also in Zhenjiang Province, the insolvency of one company adversely impacted over 300 other companies due to the credit guarantees that they provided to each other.
Source: Economic Information reprinted by State’s China Radio International, May 23, 2014 http://gb.cri.cn/44571/2014/05/23/3005s4552048.htm