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Wenzhou’s Economy Staggers with More Corporate Bankruptcies

The wave of bankruptcies is still looming over the city of Wenzhou as local businesses are struggling against debts. It seems that more corporate bankruptcies are expected this year in Wenzhou as a result of China’s slowing economy as well as a weak demand for exports.

In 2013, 346 bankruptcy cases in total were filed in the courts of Zhejiang Province, rising by 145.07% year-on-year; the total debts involved reached 159.5 billion Yuan, a sixfold increase over the year of 2012. Wenzhou, the third largest city in Zhejiang Province, was the center of the bankruptcy wave in this region. There were 198 bankruptcies filed in Wenzhou, accounting for over a half of the provincial figure. Some insiders estimate that the situation this year will be even worse.

Thousands of export-oriented businesses in Wenzhou are struggling against a staggering demand for exports this year. To make matters worse, banks are reluctant to lend money to small and medium enterprises. The city is troubled with a capital dilemma as the credit system of the entire market is falling. Many businesses went bankrupt because they were trapped in mutual guarantee for other companies. Meanwhile, along with the bankruptcy of Wenzhou Zhongtou Credit Guarantee Co., Ltd. in 2013, once the largest guarantee company in Wenzhou, 90% of the credit guarantee companies in the city have closed down. Even the highly-expected financial reform, intended to tackle the city’s financial problems, have not made much difference to improving the bad situation yet.

According to the statistics from Wenzhou’s banking authority, by the end of March this year, the non-performing loan ratio in Wenzhou has come to 4.53%. It will be a tough job to control it within 4% this year.

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