More than 20 large state enterprises in Shenyang, Liaoning province, have restructured their operations so that they are unable to repay debts of Yn20.29bn to the big four state banks, reported 21st Century Business Herald. The 21 companies have taken their best assets and used them to establish joint ventures, leaving their bad assets and other liabilities in separate companies with little or no ability to generate income.
The companies come from a variety of sectors, such as textiles, chemicals and water pumps. One example is Shenyang Storage Battery Co, which has a profitable storage battery joint venture with the Bermuda-registered Hong Kong Guangyu International Science & Technology. The liabilities of the company, including Yn200m of bank debt and welfare obligations to more than 1,000 retired workers, remain with the original firm.
"The original firm has obviously no ability to repay the nearly Yn200m it owes us," said Bai Jinghui, an asset management office with the Industrial and Commercial Bank of China. "If it does not pay, we will apply for the company to be cut off from financing from all banks."