Nearly 5,000 Chinese state enterprises per year went bankrupt since 2002

17:07, September 15, 2010      

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Nearly 5,000 Chinese state-owned enterprises have gone bankrupt every year since 2002, including central government-owned enterprises, said Li Rongrong, former director of the State-owned Assets Supervision and Administration Commission, at the 2010 Summer Davos Forum in Tianjin on Sept. 14.

Li said that some of China's state-owned enterprises have succeeded, while others have failed. Since the beginning of reform and opening up, quite a few state-owned enterprises have gone out of business, but this is barely noticeable because they were decentralized and distributed in different parts of the country.

"Whether or not a company will go under does not depend on its size. A large company will also go bust if it is not well operated, so it is an absolute mistake to assume that a large company will never collapse. Every company is bound by the rules of the market economy," Li said.

Li explained that the key to a company's success is to act in accordance with the principles of corporate development.

"The surprising fall of Enron and Lehman Brothers taught me a lesson that a company built based on the modern corporate system may also go out of business, so it is very important to study good ways of operating and managing a company," he said.

Li said the principle of survival of the fittest applies in a free market. Only companies that are best adapted to existing market conditions survive, while others just disappear.

"If inferior companies do not disappear from the market, there will be very serious consequences. China has learned a lesson from similar experiences," Li said.

Li said that a company can "stand firmly" if it makes efforts to learn and adhere to the principles of corporate development, otherwise it will "fall sadly" sooner or later.

By People's Daily Online


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