China’s bankruptcy tribunals help clean up ‘zombie companies’

The number of tribunals set up to handle bankruptcy cases in China has soared in the past two years, according to the Supreme People’s Court.

So far, courts nationwide have established 90 tribunals, up from just five in 2015.

Three were set up by provincial high courts, while the rest are all under intermediate, district or county courts, the SPC said on Thursday.

“Bankruptcy tribunals can effectively handle disputes involving ‘zombie companies’ and can accelerate local economic development,” said He Xiaorong, chief judge of the top court’s No 2 Civil Tribunal.

Zombie companies are those that are heavily indebted or rely on bailouts to survive.

From January to July, courts concluded 1,923 bankruptcy cases, up 28 percent year-on-year, according to the SPC. Last year, the figure was 3,602, representing an increase of 43 percent year-on-year.

Judge He added that bankruptcy tribunals now cover 23 provinces, autonomous regions and municipalities.

“These tribunals have improved the quality of bankruptcy hearings, efficiently cleaning up zombie companies, and playing a bigger role in providing a fair and effective environment for the market-oriented economy,” he said.

The top court also set up an online platform last year that carries information on zombie companies and helps judges deal with related cases.

“We disclose legal guidance on the platform for enterprises. Those with an intention to file for bankruptcy can appeal to courts in line with the procedures we lay out,” he said. “The entire process is transparent online, increasing work efficiency and improving public supervision.”

The SPC said the platform has been visited more than 51 million times.