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In China’s First Quarter, Bankruptcy Cases Surged

Well-known Chinese news site Sina recently reported that, based on the numbers that the Chinese People’s Supreme Court released, during the first quarter of 2016, the courts across China saw a 52.5 percent increase in bankruptcy cases, year-over-year. Experts expressed the belief that this was the result of the economic structural adjustments that the Chinese government conducted. The reforms focused on industrial production reduction initiatives. Most of these bankruptcy cases involved medium and small sized companies, which may have a lighter social impact than large enterprises. In recent years, more and more companies have preferred to take the bankruptcy approach. One of the reasons is that the government is leaning towards using the legal system to deal with the issue of “zombie companies.” Another reason is that more and more company owners have realized that, as soon as a bankruptcy case is accepted by the court, the creditors can no longer cease their guaranty and the company can restore its operations.
Source: Sina, June 24, 2016