Shanghai will see a surge in bankruptcy cases in the next few years due to sharpened competition following the country's admission to the World Trade Organisation. In view of the rise in caseload, Shanghai was preparing to set up a bankruptcy court, said Ni Huiqun, an official at the city's Higher People's Court. 'With China's entry into the WTO, competition with overseas companies will become fierce, and more Chinese firms will go out of business,' said Mr Ni. The situation would be even tougher for inefficient, state-run businesses, which had long been kept afloat with government subsidies, he said. Mr Ni said that, although China's first bankruptcy law was passed more than a decade ago, the government had kept a lid on the number of firms forced out of business, partly to ensure social stability. However, as a national social security system was put in place to protect the unemployed and courts became more self-assured in bankruptcy rulings, he believed that lid would probably be lifted. At present, bankruptcy proceedings in Shanghai are handled by local courts. Mr Ni said that, in the past three years, these courts had ruled on 126 bankruptcy cases, involving 10 billion yuan (about HK$9.37 billion) in assets. Despite the growing number of local companies dismantled by court order, the government had limited the scope of bankruptcies to protect Shanghai's image, he said. But WTO entry would spark a new wave of bankruptcies and the government would gradually ease its control over the process.