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    • How China’s Smaller Private Firms Could Pay the Price for Huge Local Government Debts
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    How China’s Smaller Private Firms Could Pay the Price for Huge Local Government Debts

    Online Niel Posted on

    Private companies in China are in a “precarious” situation. as debt-ridden local governments increasingly seek to raise revenue through tough criminal enforcement, advocates and observers have warned.
    The latest such case, involving a businessman in eastern Shandong province, has raised new concerns despite Beijing repeated commitments to promote a favorable legal environment for small and medium-sized enterprises (SMEs).

    The businessman was owed 230 million yuan ($32.3 million) for a government-backed construction project in southern Guizhou province. However, a Guizhou court in September charged him with criminal contract fraud and other illegal acts and sentenced him to 19 years in prison.

    decision aggravated concerns that local authorities were resorting to unduly harsh legal action targeting businesses elsewhere to ease the problem debt situationpressuring firms to write off government debt or imposing heavy fines to boost coffers.

    The trend for such cross-regional prosecutions has “intensified,” according to a Beijing-based legal expert who did not want to be identified because of the sensitivity of the issue.

    “Entrepreneurs in China are now in an extremely precarious situation,” which has triggered “a sense of desperation and fear,” the expert said.

    Online Niel
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