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Report: Chinese 'zombie firm' campaign sees bankruptcy cases rise in 2017

Chinese efforts against "zombie firms" has led to more than 4,700 bankruptcy cases in the first seven months of 2017, up "steadily" from 2016, Reuters reported Aug. 3, citing a senior judiciary official.

China began its campaign against such loss-making companies, surviving on government subsidies or soft loans, in 2016, aiming to shut them down to alleviate debt problems and optimize capital, labor and resource usage.

"The difficulties of launching a bankruptcy case have been effectively eased," He Xiaorong, senior director at China's Supreme People's Court, said, adding that there had been a notable drop in bankruptcy filings after 2009 as a result of weak laws and inexperienced courts, but subsequent reforms have improved the situation.

Chinese officials have said closing zombie firms could cause more than 6 million layoffs, and the government has set up funds to help pay for redundancies.

A special bankruptcy court set up in 2015 handled 1,923 cases in the first seven months of 2017, up 28.3% compared to the previous corresponding period, He said.

The average time taken to close a business through insolvency procedures in China has been reduced to 1.7 years, better than the East and South Asia average of 2.6 years, Reuters said, citing a recent report by BMI Research.