Winding up proceedings have been started against a listed mainland firm in what would be the first bankruptcy of a public company since the country's experiment with stock markets began 10 years ago. The petition to wind up Zhengzhou Baiwen, which has debts equal to 160 per cent of its assets, was made by China Cinda Asset Management Company (AMC). Zhengzhou Baiwen, a retailer and maker of domestic products in the central city of Zhengzhou, was listed on the Shanghai exchange on April 18, 1996, but trading in it has been suspended since March 29. In a petition to the Zhengzhou Intermediate People's Court, Cinda said that the company owed 2.22 billion yuan (about HK$2.07 billion) but had assets of only 1.4 billion at the end of last year. The court is considering the application and holding consultations with the local government and higher authorities, the China Business Times said. What makes the case especially significant is that Cinda is one of four AMCs set up last year to take over the bad debts of the four main state banks and turn them into good assets. The AMCs are using restructuring, mergers and debt-equity swaps to cut their parent banks' debt burdens. But, in the case of Zhengzhou Baiwen, the AMC acquired assets beyond repair, confirming the suspicion of many economists that the debt-equity swaps may be merely a way for companies and local governments to offload bad debts that the state will eventually have to pay. Xinda acquired Zhengzhou Baiwen's debts only in December, when it signed an agreement with the China Construction Bank to take over 1.93 billion yuan worth of the debt. In 1998, the company posted a loss of 500 million yuan and its auditors refused to sign its accounts, something it repeated in 1999, saying that it could not make a judgment on key financial decisions made by the firm. Zhengzhou Baiwen's problems resulted from bad internal management, weak retail demand and because its position as a middleman between manufacturer and consumer whose profit margin was shaved thinner and thinner. In 1997, it signed a deal with Chang Hong, the mainland's top producer of colour televisions, to sell its products without being paid in advance by Chang Hong, a decision which left it financially burdened. Initially, Zhengzhou Baiwen's banks paid little attention to this but, after the onset of the Asian financial crisis, became alarmed at the level of its debts and demanded payment of the interest it owed.