Bankruptcy experiment postponed
REFORMISTS within the Chinese leadership suffered a major blow when top Beijing leaders decided to postpone the controversial bankruptcy experiment for state enterprises.
The experiment which was to be implemented this year has now been postponed, said the semi-official Hong Kong China News Agency yesterday.
Reform-minded economists have spent years lobbying top leaders to speed up the bankruptcy experiment, arguing that it would be the last stage in China's transition from a centrally planned system to a market economy.
According to the original plan the experiment, under which selected loss-making state enterprises would be declared bankrupt, was to be launched in 18 major cities this year.
Instead of encouraging them to go bankrupt, Beijing hopes these enterprises can turn around by improving their management and employing state-of-the-art technology.
It was reported earlier that Beijing would concentrate its resources on keeping only 1,000 state enterprises, allowing the rest to 'fight it out' in the market.
The agency report said that top Chinese leadership feared that the experiment might cause social instability.
It said since top Chinese leaders had decided to emphasise social stability in coming years, the bankruptcy reform would therefore have to be postponed.
The lack of a comprehensive social security system was also a reason behind the delay.
It said that since the Bankruptcy Law was passed years ago, some of its clauses were no longer applicable.
It is now expected that the bankruptcy reform will be incorporated into the Ninth Five-Year Plan which is to be endorsed in a forthcoming plenary session of the Communist Party.
