China is to set up a centralised department formed by various state ministries to co-ordinate action on bankruptcies. The setting up of the co-ordinating department, led by the State Economic and Trade Commission, is expected to facilitate the passing of the long-awaited bankruptcy law, reported to have been snagged by disagreements between government departments and the largest creditor - the banking sector. Other members of the new department include the Ministry of Finance (MOF), People's Bank of China (PBOC) and headquarters of the four state banks. The State Economic and Trade Commission and the PBOC have jointly issued a notice previously addressing the most tricky area of bankruptcy procedures - how to write off debts incurred in a bankrupt enterprise. In an unprecedented move, the notice puts a cap on the total amount of debt allowed to be written off in bankrupt enterprises in the entire country. The level is to be decided by the State Economic and Trade Commission and the PBOC. The notice is only applicable to the 1,000 enterprises and 18 cities selected by the State Council as pilot cases. The amount of bad debt allowed to be written off by bank branches in each pilot city cannot exceed their bad debt and overdue reserves, or they have to be approved by their headquarters. The winding up of trading companies would have to be approved by the State Economic and Trade Commission and the PBOC before the regional governments submitted the cases to courts. The notice formally requires the PBOC to be involved in all liquidating teams. Reuters quoted mainland bankruptcy expert Cao Siyuan yesterday saying the number of bankruptcies rose by 107 per cent to a total of 1,692 bankruptcies in the first six months of this year, compared with 816 a year ago. The rise reflected the problems of ailing state firms and an ideological relaxation among Communist Party planners, Mr Cao said. A mainland legal practitioner said the rise was due partly to more pilot cases approved by the State Council last year as cases usually took more than six months to complete. Under the central government's policy of 'grasping the large enterprises and letting go the small ones', successful bankrupt cases mostly involve small state enterprises.