Bankruptcy of State-owned Enterprises and Planned Bankruptcy

Type:

Book Chapter

Published:

2016

Publisher:

Routledge

Under the planned economy and the process of economic transition, the bankruptcy of a state-owned enterprise (SOE) was not only an economic and legal issue, but also a complicated political issue, with which the government was usually concerned. Even at the present, it remains an awkward matter for the state to deal with. The main reason is the inadequate social security system which is unable to provide sufficient protection to redundant workers. The SOEs are the major providers of social welfare. Once the SOEs are liquidated, the laidoff workers will have nowhere to claim unpaid wages and social benefits except the local government. This is why the Chinese government has always been active in dealing with the liquidation and reorganization of SOEs. The planned bankruptcy programme, an expedient administrative measure, was launched in the mid-1990s under this background with the intention to provide special care to the claims of employees, even at the expense of financial creditors. This chapter will explore planned bankruptcy related issues and the state’s roles in the financing of ailing SOEs and the disposal of non-performing loans (NPLs). It will start with a discussion of the characteristics and reform of SOEs.

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