In the past few years, Wenzhou, the private enterprises hub in China has seen a large number of troubled private enterprises.

Wenzhou has addressed the issue of zombie enterprises by way of bankruptcy liquidations and some results have been achieved.

The research team at ANBOUND Consulting is of the view that the experience from Wenzhou is worthy of further consideration.

In order to facilitate the cutting of overcapacity and the cleaning up of zombie enterprises, the government should first adopt market-oriented thinking and secondly, the government must position itself correctly and make use of the judiciary system to simplify the insolvency proceedings.

Cutting overcapacity by way of market-oriented approach is not merely about insolvency liquidation, but rather the government should retain the core assets of the enterprises with prospects and revive the enterprises by attracting strategic investors.