A deputy central bank governor said today that China should let more ailing firms go bankrupt to help improve economic mechanisms rather than allow them to get government-led bailouts, Reuters reported yesterday. The risk of corporate failures in China is rising as economic growth slows and the government tries to put a lid on high debt levels in the economy to help ward off financial risks. "In the course of our surveys, we found that many companies are in the zombie state but they have taken up a large amount of credit," Liu Shiyu said. He urged companies in the coal, steel, machinery and shipbuilding sectors to find ways out of business difficulties, including using a bankruptcy law introduced in 2007. Local government officials generally mediate between creditors behind closed doors and Beijing has used the law cautiously, fearing that the failure of large firms and widespread layoffs could lead to social unrest. The number of bankruptcies handled by Chinese courts fell to 1,920 last year from 10,000 a few years ago, Liu added.
