Shaanxi’s 100 Billion RMB Steel Enterprise Dongling Group Declares Bankruptcy

Shockwaves in the Industry: Dongling Group’s Bankruptcy

Shaanxi Province’s steel enterprise with assets worth over 100 billion RMB declared bankruptcy. The bankruptcy of Dongling Group is expected to affect nearly 20,000 employees.

According to the China Enterprise Bankruptcy and Restructuring Information Network, on July 25, 2024, Shaanxi Libang Software Co., Ltd. applied for the bankruptcy reorganization of Dongling Group. The case is being handled by the Intermediate People’s Court of Baoji City, Shaanxi Province.

The website also shows that another subsidiary, Shaanxi Dongling Materials Co., Ltd., was also applied for bankruptcy by Tongshengchang Trading Co., Ltd. in Jintai District, Baoji City.

On July 30, 2024, a notice regarding the claims of Dongling Group was released, designating Beijing Guantao (Xi’an) Law Firm as the bankruptcy administrator of Dongling Group. Creditors of Dongling Group must declare their claims to the bankruptcy administrator by September 27, 2024.

Dongling Group’s bankruptcy surprised many, especially since the company was still listed as a “Top 500 Chinese Enterprises” in 2023. The company ranked 205th with assets of 125.7 billion RMB and 69th in the “Top 500 Chinese Service Enterprises.”

Overexpansion and Mismanagement: The Downfall of Dongling Group

Industry experts believe the bankruptcy of Dongling Group resulted from overexpansion, market fluctuations, and poor management. The company’s involvement in numerous bankruptcy and judicial cases indicates problems with debt repayment and insolvency.

Real Estate Ties: A Key Factor in Dongling Group’s Collapse

Another view suggests that the deep connection between the company and the real estate sector led to its downfall. The group’s steel production once ranked first in China for sales of construction steel, while its real estate investments had been declining for several years. Public information shows that in 2018, the group invested 1.3 billion RMB to revitalize the Silver Hui Center project, which had been unfinished for eight years. In 2020, the group’s accounts were frozen due to a contract dispute with an elevator supplier, followed by further economic disputes with construction companies.

Economic Ripple Effect: The Broader Impact of Dongling’s Collapse

The bankruptcy of Dongling Group might damage the company’s brand image and market reputation, according to Bai Wenxi, Vice Chairman of the China Enterprise Capital Alliance. Economist and new financial expert Yu Fenghui added that the bankruptcy of such a large private enterprise could impact the local and national economy, particularly affecting the upstream and downstream industries. Furthermore, 18,000 employees face the risk of unemployment, and financial markets might experience volatility, affecting associated financial institutions and investors.

Dongling Group, founded in 1980 as a village-run collective enterprise, crossed the 100 million RMB revenue mark in 1994 and formed the Dongling Group in 1996. After years of development, the group expanded into steel and non-ferrous metal smelting, mineral energy, supply chain services, and became a large private zinc smelting enterprise in Western China.

As of August 2, 2024, Dongling Group is embroiled in serious legal disputes, involving 145 judicial cases, including sales contract and loan contract disputes. The total amount of enforced claims has reached 1.27 billion RMB.

(IRuniverse)

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