A weakening economy and tight liquidity are driving a growing number of companies into bankruptcy in Wenzhou, a hotbed of entrepreneurship in eastern China’s Zhejiang province.
Exporters are the hardest hit, Economic Information Daily reported Friday.
Zhejiang courts handled 346 bankruptcy cases in 2013, of which 198 involved Wenzhou companies, up 145 percent year on year.
Corporate debt tied to bankruptcies hit 159.5 billion yuan (US$25.9 billion), up nearly sixfold from 2012.
Local companies are experiencing a severe cash crunch, soaring labor and production costs and weak sales. Some banks have stopped lending to them, the report said.
Also, private financing have stalled, with about 90 percent of Wenzhou’s guarantee companies bankrupt, after a recent wave of defaults and debtor flight.
In the banking sector, non-performing loans (NPL) were 33.2 billion yuan at the end of March, with the NPL ratio at 4.53 percent, well above the 4 percent official target for the full year.
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