Bankruptcy cases surged in China last year, indicating growing economic stress as well 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.
Chinese courts accepted 5,665 bankruptcy cases in 2016, an increase of 54 per cent from the year before, the country’s top court said on Friday. About 3,600 of those cases were resolved, with 85 per cent of the resolved cases resulting in liquidation.
“It is linked to getting rid of zombie companies and making the economy more efficient,” said Susan Finder, law scholar in residence at Peking University’s Shenzhen Graduate School. “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.”