More than 500 state firms in the western province of Qinghai have used the cover of bankruptcy and restructuring to evade more than five billion yuan (about HK$4.68 billion) in debts to the four big state banks, an official newspaper reports.
The mainland's Business Post yesterday gave a detailed account of the black hole facing banks in many parts of China, with state companies changing their ownership to escape debt and then persuading local governments that social stability would be at risk if they had to pay up.
The non-payments became so serious in Qinghai, one of the poorest regions of China, that in July, the provincial government set up a special committee to chase them.
It found that at the end of last year, 524 of the 906 state firms that had declared bankruptcy or turned themselves into shareholding companies had evaded repayment of bank principal and interest totalling 5.16 billion yuan, equivalent to 54.48 per cent of what they owed. Of the total, 301 had announced bankruptcy.
The victims are the big four state banks: Industrial and Commercial Bank, Bank of China, Construction Bank and Agricultural Bank.
In July, the Qinghai bank association drew up a list of measures, starting with a warning, followed by a cut-off of financial services. In September, it threatened several firms with such a cut-off. But this prompted 30 firms to appeal to the provincial government to suspend the order in the name of stability and unity, and the government acceded to this request.
