The rebirth of a privately-owned shipbuilding enterprise in Taizhou, Jiangsu

The port shipping company is stepping up production. Photo by Zhou Shuping

A 73-meter-high, 140-meter-span gantry crane is lifting sections of the hull into the dry dock; sparks fly as several workers, wearing goggles, weld with welding torches; the Dingxin 107, with an overall length of 200 meters and a width of 32 meters, is taking shape. On the Yangtze River, the sound of ship horns seems to welcome this new addition... This is the scene witnessed by a reporter on October 29 at the Taizhou Port Shipbuilding Co., Ltd. (hereinafter referred to as the Port Shipbuilding Company) in Gaogang District, Taizhou City, Jiangsu Province.

“Before last year's National Day, all we saw in our company's vast factory area was rusty steel and overgrown weeds.” Qi Wenchuan, the restructuring investor, spoke with emotion about the changes.

■Large shipyards fall into bankruptcy crisis

Located on the north bank of the Golden Waterway of the Yangtze River Delta, within a two-hour economic zone of Shanghai, the Port Shipbuilding Company has a 3000-meter shoreline, one 200,000-ton dry dock, two 50,000-ton shipways, one 600-ton gantry crane, two 500-ton gantry cranes, and four outfitting wharves, with an annual shipbuilding capacity of 2 million deadweight tons.

The company was formerly the Port Shipbuilding Industry Company under the Ministry of Domestic Trade, founded in the early 1970s. It was restructured into a private enterprise in 2007. It is the first private shipyard in Jiangsu Province to obtain military "four certificates" and was once among the top ten private shipbuilders in China.

In front of the company's office building, plaques reading "Contract-Honoring and Credit-Keeping Enterprise (National Level)", "China's Top 500 Private Manufacturing Enterprises", and "Jiangsu Provincial High-tech Enterprise" are still eye-catching, despite some rust.

Entering the company's product showroom, one can see models of various bulk carriers, refined oil and chemical tankers/ro-ro ships, and special engineering vessels. Wang Gang, the company's party secretary, told the reporter that these ships were once exported to dozens of countries and regions in North America, Europe, Africa, the Middle East, and Southeast Asia.

“How could such a glorious enterprise suddenly fall into bankruptcy?” With this question in mind, the reporter went to the company's Yong'an factory area.

In response to the reporter's questions, Guo Chaoyi, the former general manager of the Port Shipbuilding Company, said that since the 2008 global financial crisis, the company has never lacked orders, but prices have plummeted, costs have remained high, and losses have been incurred with every project. At that time, the company leaders, with the idea of "sacrificing profits to maintain market share, believing the financial crisis would eventually pass," gritted their teeth and persisted in production, but the more they produced, the more they lost. In recent years, due to the continued downturn in the international shipping market and the overcapacity of domestic shipyards, the company fell into difficulty. In October 2019, its funding chain broke, production stopped, banks and suppliers began to sue, and workers began to apply for labor arbitration or appeal. With the increasing number of lawsuits, the company's production and operation completely paralyzed in May 2020, and it was forced to file for bankruptcy in August 2020.

Sun Naiqing, vice president of the Gaogang District People's Court, interjected: “During last year's National Day holiday, I visited the company several times, and the company's office building was filled with workers demanding wages, as well as some material suppliers. Some workers were very emotional and said they would continue to appeal until the problem was resolved.”

Qi Wenchuan flipped through the accounts, and the company owed wages to more than 5,000 employees, and the company's more than 20 bank accounts and ships under construction were all sealed.

According to Zhou Shuping, head of the civil court of the Gaogang Court, the Port Shipbuilding Company has more than 200 lawsuits and enforcement cases.

■Accelerated government-court coordination brings a turning point

The Port Shipbuilding Company had orders, but a temporary break in its funding chain led to an operational crisis. The company has restructuring value. This was the consensus reached by the leaders of the Gaogang District Committee and Government and the court.

On August 7, 2020, the Gaogang Court ruled that the Port Shipbuilding Company would undergo bankruptcy reorganization, and appointed the "Port Shipbuilding Series" liquidation team, headed by the District Committee and Government, as the administrator.

Whether the Port Shipbuilding Company could overcome the crisis and become profitable was a difficult problem facing the Gaogang Court. The Gaogang Court decided to adhere to the "three ones".

Establish a strong belief, and persevere no matter how difficult it is. The case is complex, involving a large number of creditors, a huge amount of debt, and serious antagonism among employees. These pain points, difficulties, and bottlenecks are superimposed and fermented, and could explode at any time, having a significant impact on regional development and social stability. Would anyone be willing to invest? Could the series of contradictions be resolved smoothly? What other unpredictable problems might arise?

Faced with a series of challenges, how to tackle these "hard bones"? Sun Naiqing said with feeling that Yang Gensi, a first-class combat hero during the War to Resist US Aggression and Aid Korea, was from Taizhou. Yang Gensi had the spirit of "three disbeliefs"—disbelief in tasks that could not be completed, disbelief in difficulties that could not be overcome, and disbelief in enemies that could not be defeated. In promoting the bankruptcy reorganization of the Port Shipbuilding Company, they also carried forward the spirit of "three disbeliefs." This is the only way to complete the task with energy and spirit, to endure hardship without complaint, to bear fatigue without complaint, and to face difficulties without fear.

Build a good team capable of fighting tough battles. The Gaogang Court formed a trial team with Sun Naiqing as the presiding judge and Zhou Shuping and Liu Anfeng as members of the collegial panel, and drew on the backbone of the entire court to form a special working team for the "Port Shipbuilding Series".

After the Gaogang Court issued an investor recruitment announcement on August 7, 2020, with the support of the District Committee and Government, Taizhou Changqin Shipbuilding Engineering Co., Ltd. and Taizhou Changyue Enterprise Management Co., Ltd. were identified as investors, and production gradually resumed in mid-August. Because the company's accounts and several ships were under judicial seizure, resuming production encountered obstacles. To this end, the Gaogang Court immediately organized personnel to go to more than 20 courts in Shanghai, Nanjing, Wuhan, Yichang, and Wuxi to cooperate in lifting preservation measures.

“I remember it was Saturday afternoon, and the court temporarily notified me to go to the Nanjing Maritime Court immediately to ask them to cooperate with us in lifting several preservation measures. I received the call and left immediately. We worked at the Nanjing Maritime Court for a whole day and successfully lifted the preservation measures.” recalled Liu Anfeng, a member of the collegial panel for the reorganization case.

The timely lifting of judicial preservation measures effectively ensured the smooth construction of three military ships and the continuation of four foreign trade ships, providing a legal "acceleration" for the reorganization of the enterprise's production and operation.

In just two months, the team received, verified, and confirmed 3,558 creditors, mailed more than 2,300 documents, negotiated with more than 10 financial institutions more than 40 times, and made several trips to Beijing and Yangzhou for communication. The team members worked "5+2" and "day and night", which had become the norm. During the National Day holiday, everyone worked without rest.

Fully utilize a good mechanism, with government-court collaboration demonstrating great power. Under the support and leadership of the District Committee and District Government, Gaogang Court issued the "Notice on Establishing a Coordinated Linkage Mechanism for Enterprise Bankruptcy Disposal," establishing a coordinated linkage mechanism for enterprise bankruptcy disposal among 19 departments including the court, Public Security Bureau, Administrative Approval Bureau, Development and Reform Commission, Industry and Information Technology Bureau, and Human Resources and Social Security Bureau, promoting the institutionalization and normalization of government-court collaboration.

According to Sun Naiqing, in the more than a year since the crisis at Kouan Shipbuilding Company began, the District Committee and District Government proactively took action, solidified responsibilities, immediately established a special working group, initiated emergency response, thoroughly understood the company's wage arrears situation, coordinated and raised 61.83 million yuan to pay part of the wages for employees (migrant workers); coordinated relevant departments to hold over 30 special meetings, invited over 200 employee representatives to clarify policies and provide explanations. Representatives from the district government, the court, and the administrator were stationed at the company to implement a "daily report, daily discussion" system, ensuring the company's stable and orderly operation during the restructuring period.

■ Riding the momentum brings vitality

The smooth approval of the restructuring plan required the understanding and support of creditors. When Gaogang Court and the administrator communicated the restructuring plan with creditors in advance, most creditors could not accept it, and doubts arose for a period. To address this, Gaogang Court mobilized again on the basis of Kouan Shipbuilding Company's bankruptcy special office. Staff members gave up rest and worked overtime, engaging in dialogue and negotiations with various creditors. They created a manual addressing creditors' concerns, which was given to the working group and village/community cadres for negotiation, making the bankruptcy process more open and transparent. After repeated consultations, the restructuring plan was successfully approved, maximizing the interests of all parties, including the enterprise, creditors, and employees.

Protecting employees' rights and interests involves social harmony and stability. Kouan Shipbuilding Company originally had one person per position, leading to overstaffing, which largely dragged down the enterprise. Gaogang Court strengthened coordination efforts, actively guided the company and its employees to negotiate the termination of labor contracts according to normal wage standards, and guided employees to resolve disputes through arbitration, court litigation, and other procedures. Ultimately, 1314 people negotiated the termination of their labor contracts. According to Qi Wenchuan, the company's administrative staff and auxiliary workers originally numbered over 1800, but now there are only 209. Advocating for employees to be multi-skilled and hold multiple positions has greatly improved the company's efficiency.

Qi Wenchuan opened the ledger and happily said that in the year since the restructuring, Kouan Shipbuilding Company and its affiliated enterprises have resumed normal production and operation, and have paid various expenses on time or in advance, strictly in accordance with the timelines and payment ratios specified in the restructuring plan.

According to Qi Wenchuan, during the company's bankruptcy restructuring, production of 4 foreign trade vessels resumed, including two 80,000-ton ships and two 40,000-ton ships; construction of 3 military vessels also began. On October 21, 2020, the company's bankruptcy entered the substantive execution phase of the restructuring plan. Soon after, orders for two 50,000-ton bulk carriers and three deck transport ships were received.

Regarding the production situation, Qi Wenchuan recounted them like family treasures: 3 ships completed and delivered, 1 ship launched and awaiting delivery, 32 orders on hand, and production tasks scheduled until 2023.

When talking about the company's internal management and qualification maintenance, Qi Wenchuan smiled even more broadly: In March this year, they passed the special assessment for major matters concerning equipment supplier qualification; in May, they passed the annual supervision audit for equipment supplier qualification; in September, they passed the production condition re-evaluation for Kouan Shipbuilding as a Class I steel general shipbuilding enterprise organized by the Jiangsu Provincial Department of Industry and Information Technology; in October, they passed the Level II safety standardization re-evaluation for Kouan Shipbuilding organized by the Jiangsu Provincial Department of Industry and Information Technology. Qi Wenchuan believes these are indispensable "soft strengths" for enterprise development.

During the symposium with Kouan Shipbuilding Company, attendees from different perspectives all expressed the idea that Gaogang Court, by revitalizing assets and introducing strategic investors, has maximized the protection of creditors' interests and achieved corporate "rebirth," providing replicable and scalable experience for rescuing distressed enterprises, optimizing market resource allocation, and supporting the development of the private economy.

"Kouan Shipbuilding Company, after bankruptcy reorganization, will surely re-equip and set off again, rowing hard and sailing far!" said Zhu Lianbing, Deputy Minister of the company's Production Department and Director of the Hull Workshop, with delight as he watched the ships coming and going on the river.