Due to the extortionate investment in home and securities, GITIC neglected to meet its maturing debts and also the PBC declared its bankruptcy. 54 After a three-month amount of liquidation, it had been unearthed that GITIC’s aggregate assets were only RMB 21.5 billion while its liabilities had reached RMB 36.2 billion. The ratio of liabilities to assets was 168 per cent and GITIC was clearly insolvent. 55

GITIC’s sudden bankruptcy exposed issues in China’s economic compliance and regulation system. For instance, a wide range of medium-sized banking institutions was in fact closed, including one bank that is commercialHainan developing Bank) and two ITICs (Asia Agribusiness ITIC and Asia Venture Technology ITIC). Throughout the exact same duration, 23 metropolitan credit cooperatives and 18 rural credit cooperatives had been closed. 56 However, all those institutions were bought out by other institutions that are state-owned later became in charge of their liabilities. Investors had been hence guaranteed in full the protection of these investment. This paid down the significance of information disclosure and hindered the growth of a system that is regulatory. As an example, even though the PBC had set disclosure that is certain for finance institutions, it failed to oversee or enforce their execution. Few organizations published their fundamental indicators frequently, and also the not enough disclosure lead to an information deficiency among professional auditing agencies. Continue reading →