Companies in Wenzhou, China’s entrepreneurial hub and epicenter of the underground banking sector, struggle to survive

June 3, 2013 Leave a comment

Companies in Wenzhou struggle to survive

Staff Reporter

2013-06-02

Wenzhou City Sentai Environmental Protection Equipment has qualified for bankruptcy protection amid a growing wave of struggling companies in Wenzhou in eastern China’s Zhejiang province — the country’s entrepreneurial hub and epicenter of the underground banking sector — reports Guangzhou’s Southern Weekly.

The Wenzhou municipal party committee approved the application and under its restructuring and bankruptcy protection program, loss-making companies can continue to run their businesses without being targeted by debt collectors. It also means that the court cannot order the sale of the company’s assets, aiming to help struggling companies obtain financial aid and pay their dues through a legal process.Despite the measures, many companies are still hesitant to file legally for bankruptcy protection in fear that their businesses will forever be tarnished in the public eye, with the stigma attached to bankruptcy, the paper said.

Figures show that even though 9,000 companies in Wenzhou showed signs of struggling last year, courts in Wenzhou received only 51 bankruptcy protection applications between 2007 and 2012.

The situation improved dramatically in March this year, however, after the Wenzhou City Intermediate Court announced that it will take on 100 bankruptcy protection cases, urging companies to resolve financial issues through the legal process and avoid covering up their financial issues.

But analysts said the core issue facing Wenzhou’s business environment was companies’ overproduction and the unwillingness of investors to inject capital into local businesses, the Southern Weekly said. “The government should help local companies run their businesses safely by soliciting the opinions of experts, analysts and investment bankers,” said Yang Yili, a manager at a local investment management firm.

Filed under Macro Trends

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