Libel accusations against Chinese loan fraud stories

WENZHOU - A Chinese electronics firm is suing some of the country's most popular media over their reporting of its bankruptcy amid mass private lending fraud that closed a number of enterprises in an east China city last year.

The libel case against the operators of the Netease and Sina Internet portals, the Chengdu Evening News, the 21st Century Business Herald and its parent 21st Century Media Group was heard by the Longwan Court of Wenzhou city last Friday, court officials told reporters on Monday.

The plaintiff, Wenzhou Tietong Electric Appliance Co Ltd, alleged "rumors" spread on the Internet last June saying the company had been bankrupted in a debt crisis. The 21st Century Business Herald in August and September mentioned the bankruptcy in two separate stories covering cases of loan fraud in Wenzhou. The Chengdu Evening News published a similar story which was picked up by the Sina and Netease websites.

The libel allegation, however, was denied by the accused.

Tietong demanded a combined compensation of 200,000 yuan ($31,746) and measures to restore its tarnished reputation from the media organizations.

The judge ordered both sides to gather more evidence and return to the court on another day for a second trial.

Wenzhou, a city known for its residents' entrepreneurship, was seriously affected by the private debt crisis last year.

At its height, more than 90 bosses of private companies in the city were reported to have disappeared, committed suicide or declared themselves bankrupt -- invalidating debts of about 10 billion yuan owed to banks and individual creditors pooled from the informal lending market.

Chinese and foreign media covered the debt crisis extensively, which in part prompted the authorities to act, from asking state banks to prioritize lending to small and medium-sized firms to drafting rules to regulate the huge private lending market.