As reported by the Financial Times, in recent months Chinese bankruptcy court judges have started to receive instructions and case studies so that they know what judgements to make to save failing companies. This is the authorities' response to the growing number of unconstructive company bankruptcies, in which the owners do not seek state help until the end.
Only 1,028 company bankruptcies were registered in China in the first quarter of this year, according to the Financial Times, a 52.5 per cent increase on the previous year. China's Supreme People's Court reports that there were fewer than 20,000 such cases between 2008 and 2015.
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Chinese 'face preservation' firmly embedded in the region's culture for thousands of years, which in the past forced warriors who made a mistake, endangered people or suffered a defeat to an honourable, suicidal death, in a slightly different form, but still operates in business.
Entrepreneurs who, for various reasons, get into trouble, do not seek the State's help, do not use the instruments that the new bankruptcy and restructuring law introduced in 2007 has given them. They usually try to solve their problems on their own, in addition without admitting to anyone that any problem exists. Once they have exhausted all possibilities, they collapse, go bankrupt and cover themselves in shame. Some of these businessmen never go back to running their own companies. Not only do they suffer, but also their employees, families and partner companies.
New law provided a number of instruments to save companies, which have reached the brink. Such companies can, among other things, ask the court to stay the enforcement, collection and enforcement of creditors' claims for a specified period of time in order to restructure their business and plan feasible repayments of debts. Preserving a functioning business translates into the preservation of many jobs for ordinary people. Therefore, the Chinese economy faces a real challenge of saving companies.
23 October 2016:
" Who knows how to save companies from bankruptcy? The Chinese.
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