Unprecedented Bankruptcy Reorganization Wave Coming to China

Xi Jinping has said there will be four "annihilations" in 2016 and one will be overcapacity. If this actually happens, either GDP estimates are way too high or the government is planning to print severance pay for million upon millions of workers. With labor unrest growing, the latter may be needed simply to keep the peace.

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Phoenix Financial News According to the "Economic Information Daily "quoted authoritative news channel, national fist governance is brewing overcapacity, will accelerate the establishment of a more effective exit mechanism, the steel industry bear the brunt, including electrolytic aluminum, cement, shipbuilding and other industries with excess capacity the whole industry is facing an unprecedented influx of bankruptcy reorganization, the relevant departments have been carried out long-term research.

19th Meeting of the Central Financial Work Leading Group, the Xi Jinping put forward four "annihilation," including overcapacity. Recently held a Politburo meeting, Xi Jinping again be made to actively and steadily promote the survival of the fittest, through mergers and acquisitions, bankruptcy and liquidation, to achieve market clearing.

Premier Li Keqiang also raised, for more than two years time, spend a greater effort to transform the kinetic energy of the old upgrade. "First Financial Daily" from near the official who was informed, recently appointed by the main leaders of the research group has started research on excess steel production capacity, and strive to achieve the transformation and upgrading of production capacity as soon as possible, to prevent systemic risk.

This person also said, from the overall layout of view, "resolutely out of a group, more transformation and upgrading a number of" general idea. "In the serious overcapacity in the industry, next year will accelerate the integration of restructuring and mergers and acquisitions, focusing on the bigger number of large enterprises." This person said that the central idea is to shorten the time of upgrading, so that the traditional momentum continued to be effective, at the same time the development of a new momentum to win time and space.

Media statistics found , whether it is a high energy consumption of electrolytic aluminum, steel manufacturing, or photovoltaic solar and wind power new industries, as well as in the shipbuilding and steel industries silicon steel high-end products are the industry that "excess capacity."

Further, the steel, iron ore , coal , petroleum, petrochemical and other heavy chemical sector, industry overcapacity particularly serious. Data show that, PPI (producer price index) over 40 consecutive months of negative growth, these five industries for the entire industrial PPI decline of "contribution" to account for 70% to 80%.

In fact, with the way of mergers and acquisitions to accelerate the elimination of backward production capacity is not a new formulation. The last two years, many ministries leaders have publicly explained this idea. Although consensus has been formed, but the actual implementation of the effect is not ideal. The reporter combing found that companies can not be "quit" the main reason, one taking into account the employment problem, and second, concerns about non-performing assets, the third is considering the impact on the regional economy.

It is noteworthy that, compared with some of the concerns employment and regional economic issues, central's attitude is very firm. Li had said at the meeting, we want great determination, the next step will be "zombie companies", "absolute excess capacity" of the enterprise under the knife ruthless, and determined to make a few selected areas of serious excess capacity "strike."

iFeng: 多行业一场前所未有破产重组潮要来了!

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