China arranges US$618m bailout of company
(AP)
Updated: 2005-12-02 11:50

China has arranged a 5 billion yuan ($618 million) bailout for one of the nation's biggest state-run conglomerates — a collection of textile and drug businesses set up in 1992 as a model for restructured enterprises.

China Chengtong Group, newly designated as a state-owned assets management company, will take over China Worldbest Group and help the Shanghai-based conglomerate cope with outstanding loans totaling 25 billion yuan ($3.1 billion), the official Xinhua News Agency and other state media reported Thursday.

The funds from Chengtong will be used to help reduce China Worldbest's liabilities and resolve a cash crunch, the reports said.

The reports did not explain why China Worldbest was having trouble repaying its loans.

Worldbest, set up in 1992, was formed through about 90 deals involving smaller state enterprises. It has 60,000 employees and reported assets of 57 billion yuan ($7 billion) in 2004.

According to China Worldbest's Web site, the company is Shanghai's fourth-largest industrial group and owns China's largest pharmaceutical group and its largest textile group. The company originally was set up as part of Shanghai's massive restructuring of its textile industry.

Beijing-based Chengtong was founded in 1992 as a logistics company.

Chengtong's subsidiary, China Chengtong Development Group, whose shares are traded in Hong Kong, reported a net loss in the first half of this year of 61.9 million Hong Kong dollars ($7.7 million) compared with a net profit of 149 million Hong Kong dollars in the first half of 2004.

China has been gradually reducing government holdings in many smaller companies, while boosting state control of industries considered to be strategically important.

The state-owned Assets Supervision and Administration Commission and the China Development Bank laid the groundwork for the bailout in September, arranging a 20 billion yuan ($3 billion) policy loan for Chengtong Group through 2008, Xinhua said.

Part of those funds will be used to pay for the cost of taking over Worldbest, it said.