South China opens bankruptcy court to battle "zombie companies"

The higher people's court of south China's Guangdong Province on Monday established a bankruptcy division to deal with "zombie companies".

"Zombie companies" are economically inviable businesses, usually in industries with severe overcapacity, kept alive only with support from the government and banks.

The division will focus on bankruptcy and compulsory liquidation cases, offering guidance to other courts in the province and exploring ways to regroup or close down "zombie companies".

At the end of 2015, China's Central Economic Work Conference emphasized the importance of supply-side reform and the clearance of "zombie companies" as a way to cut overcapacity.

Tan Ling, deputy head of the court, said the new division enables better implementation of the Bankruptcy Law and appropriate treatment of different cases.

Guangdong has set a target of closing or regrouping of all its zombie companies within three years.

Li Cheng, director of Guangdong state-owned assets supervision and administration commission, said a total of 3,385 companies in the province were identified as "zombies", 2,333 of which are marked for closure. Endi