In 2019, Alan Hill’s investment in a Chinese pork processing company declared bankruptcy, leaving the former Apple executive shocked upon hearing the news. Hill, from Albuquerque, New Mexico, and a retiree from Apple, had invested around $100,000 through the U.S.-listed holding company Energroup Holdings in Dalian Chuming Meat Processing Company. Although the company had not paid dividends for years, it had been profitable at least until 2016, supplying goods to Walmart.
In 2021, a court in Dalian, China, ruled for the liquidation of Chuming company, a process that lasted three years, involving asset auctions and debt repayments. This also meant that American shareholders had to give up pursuing unpaid dividends.
At almost 86 years old, the upcoming loss is deeply distressing for Hill. “I feel like I’ve been deceived,” he said. “I had hoped to leave this money to my children.”
However, what surprised him even more came later. In June 2024, Hill and other shareholders learned from China’s food regulatory authority that Chuming company was still in operation, despite the court having announced the completion of liquidation almost four months prior.
According to a health and safety certificate issued by the Dalian Market Supervision Administration, Chuming company was still in operation in June 2024. Photos seen by Reuters showed pork products packaged in May of that year still being sold in the market until November. The Chinese regulatory agency did not respond to Reuters’ request for comment.
The current operation status of Chuming remains unconfirmed. When Reuters visited the company’s last registered address in Dalian in March of this year, the factory was still running, with a sign that read “Dalian Chengsan Chuming Food Processing Company,” slightly different from the pre-liquidation company name, without providing an explanation for the change.
In three markets and a supermarket in Dalian, pork stalls still carried the Chuming sign, but the company names listed on the packaging labels were from the new company mentioned above.
Amid China’s economic downturn and a collapsing real estate market, bankruptcy cases are sharply on the rise. According to data from the Supreme People’s Court of the Communist Party of China, the number of bankruptcy cases accepted by courts nationwide was around 30,000 in 2023, far exceeding the 10,000 cases in 2020.
After reviewing multiple court and corporate records and interviewing nine lawyers and investors, Reuters found serious flaws in China’s bankruptcy procedures, putting investors at high risk. With the economy slowing down, companies are increasingly resorting to improper means to file for bankruptcy and transfer assets.
Some lawyers pointed out that malicious bankruptcy cases have increased with the worsening economy. Management can delay debt repayments through bankruptcy procedures, and the Communist Party of China’s courts often have lax scrutiny on whether companies are truly unable to operate, sometimes appearing as if they are just set up to fail.
Some companies have applied for bankruptcy without shareholder consent, refused to disclose financial records, and continued operations even after the court announced liquidation, severely damaging the rights of creditors and investors.
Hill and other shareholders successfully sued Chuming’s top management for illegal asset transfers in August 2018 in Nevada, USA but have not been able to receive any remedies from the Communist Party of China’s court.
A lawyer stated: “Local Chinese courts generally favor local residents and often disregard the rights of American shareholders.”
Chuming company and its lawyers did not respond to Reuters’ request for comment. U.S. holding company Energroup stated that it had no relationship with Chuming. Walmart also did not respond to questions from Reuters.
Even in domestic cases, Communist Party of China’s courts often lean towards local government interests, making it difficult to reach a fair ruling in bankruptcy cases. According to China’s own laws, companies should cease operations within 10 days of a court-ordered liquidation, but several lawyers pointed out that this provision is often disregarded in practice.
In the case of Chuming, its sole direct shareholder, Jin Kun, Chairman of Dalian Precious Sheen Investments Consulting Limited, stated that the company filed for bankruptcy without shareholder consent and refused to disclose financial records when requested by the court, leaving investors unable to confirm whether the company was truly insolvent.
Jin Kun estimated that he lost hundreds of millions of dollars in the Chuming case. He urged the Chinese authorities to strictly enforce the law, preventing companies from maliciously avoiding debt through bankruptcy procedures, infringing on the rights of foreign investment and private enterprises.
As of now, the State Council of the Communist Party of China has not responded to the related inquiries.