Taohuayuan Pedestrian Street at the time of bankruptcy acceptance.
Taohuayuan Pedestrian Street after the manager continues operations to completion.
On January 15, Taoyuan County in Changde, Hunan Province emerged from days of persistent drizzle into bright sunshine. Flags fluttered throughout the county town, and festive air was palpable. The banners reading "Grand Launch of Property Auction" were everywhere, hinting that all unsold properties in the central Taohuayuan Commercial Pedestrian Street would be auctioned off.
The auction was scheduled for the next day, and by January 15, it had already received nearly 8 million yuan in prepayments from close to two dozen households. This reaffirmed that the shops on the Taohuayuan Commercial Pedestrian Street were "high-quality assets capable of immediate liquidation." For this reason, the Standing Committee of the Taoyuan County Party Committee convened an expanded meeting. The local court also invited eight media outlets for interviews, emphasizing not only the legality of the procedures but also specifically pointing out that to maintain stability, the approach of "bankrupting one company and revitalizing a street" was justified.
At the same time, however, the petition titled "Request to Stop the Auction" submitted by the developer of the Taohuayuan Commercial Pedestrian Street, Taoyuan Common Entrepreneurship Real Estate Development Co., Ltd. (hereinafter referred to as Common Creation Company), had reached the desks of high-level officials in Hunan Province. They argued that the auction without prior debt verification or convening of creditors' meetings was illegal. The company's chairman, Shi Bing, even directly accused the local government of administrative interference with the judiciary, leading to the bankruptcy liquidation applicant lacking proper standing and the court failing to fulfill its duty of review before illegally accepting the case. As a result, the court maliciously declared the Common Creation Company bankrupt. Shi Bing's online accusations against the illegal bankruptcy and certain local leaders for judicial malpractice were once widely supported by netizens.
As a result, the auction did not proceed as scheduled. According to informed sources, the Higher People's Court of Hunan Province and the Municipal Committee of Changde jointly intervened to stop the auction and required a creditors' meeting for the Common Creation Company bankruptcy case to be held on February 5.
Throughout the year-and-a-half-long Common Creation bankruptcy case, such confrontations have occurred multiple times. The direct consequence has been that the pedestrian street, which was expected to enhance the city's image, became an "unfortunate street," with no hope of opening and hundreds of homebuyers lodging complaints. The Common Creation bankruptcy case evolved from a civil case into the largest political event in the region, touching on issues of embezzlement, corruption, and stability, testing the political resolve of the Changde authorities.
On June 10, 2009, Hunan's *Xiangxiang Morning Post* published an investigation titled "Investigation of Hunan's First Bankruptcy Street," and on January 8, 2010, more than ten domestic and international media outlets gathered in Taoyuan to refocus attention on the Common Creation Company bankruptcy case. The High People's Court of Hunan Province and the main leaders of Changde City repeatedly reminded the Taoyuan court: the Common Creation bankruptcy case must be handled according to law.
Hunan's First Bankruptcy
The Taohuayuan Commercial Pedestrian Street is one of the earlier pedestrian streets planned in Hunan's counties, proposed in 2003, and is also the first commercial street in Hunan to enter the bankruptcy process.
What pushed the developer Common Creation Company to the brink of bankruptcy was Taoyuan Urban Construction Investment and Development Co., Ltd. (hereinafter referred to as Urban Investment Company). Urban Investment Company is a wholly state-owned enterprise under the Taoyuan County Government, responsible for key urban construction projects, with its chairman concurrently serving as the deputy county magistrate. It was also the party A in the development of the Taohuayuan Pedestrian Street project by Common Creation Company.
On July 15, 2008, Urban Investment Company applied to the local court for the bankruptcy liquidation of Common Creation Company, citing its inability to repay a due debt of 6.05 million yuan and its obvious lack of repayment capacity. The Taoyuan County Court accepted this application. On June 22, 2009, the Taoyuan County Court ruled that the Common Company would go bankrupt.
However, in Shi Bing's view, Urban Investment Company did not have the legal standing to apply for the bankruptcy liquidation of Common Creation Company.
Materials provided by Common Creation Company show that as both parties involved in the project cooperation, the two companies mutually owed each other debts. Urban Investment Company should pay Common Creation Compensation of 5.06 million yuan for delayed land delivery, as well as project guarantee deposits, less land refund payments, and agency demolition and resettlement fees, totaling 13.7 million yuan. "This claim has never been made by Urban Investment Company, and Common Creation has also not experienced situations where it cannot repay due debts or where liabilities exceed assets," Shi Bing believed that the Taoyuan County Court's acceptance of Urban Investment Company's bankruptcy application was wrong from the start.
In response, the Taoyuan County Court believed that the mutual indebtedness claims between the two parties were invalid. Previously, President Qin Hongwei of the court told the media in an interview that in handling the Common Creation bankruptcy case, the court only conducted formal reviews, not substantive reviews.
Moreover, the Taoyuan County Party Committee and government emphasized that Common Creation Company's poor management and illegal activities caused extremely bad social impacts, and declaring it bankrupt for liquidation was also a strong measure to maintain local social stability.
The background was that on February 15, 2006, the pedestrian street project officially broke ground. On January 10, 2007, the pedestrian street began sales, with 432 households paying advance purchase amounts totaling over 70 million yuan. However, by May 30 of the same year, the contractually agreed-upon delivery date, the pedestrian street project remained unfinished and began to halt gradually, although the main structure was never halted. At the time the court accepted the bankruptcy application, Common Creation Company had completed 90% of the total project. Rumors began circulating that the developer had absconded with huge funds from the pedestrian street project, exacerbating the emotions of the local populace, especially the homebuyers.
Li Weimin, Member of the Standing Committee of the Taoyuan County Party Committee and Director of the General Office of the County Government, said that the halt of the pedestrian street project involved hundreds of families including homebuyers and builders. The government had been actively helping Common Creation rectify and attract investments, but all attempts failed. Bankruptcy was the only way to solve the substantive problems. "Pushing Common Creation into bankruptcy has at least two benefits: completing the pedestrian street construction and helping Common Creation get rid of bad debts."
But Shi Bing believed that the root cause of the pedestrian street problems lay in Urban Investment Company's failure to demolish and vacate the land on time, leading to delays in construction progress, non-disbursement of bank loans, and forming a vicious cycle. "According to the contract, Urban Investment Company should have completed the demolition task by October 18, 2006, but it wasn't until September 2007 that they finished. When the court accepted Common Creation's bankruptcy, there were still 18 months left for the pedestrian street's development time."
"Maintaining stability cannot depart from the legal framework; it cannot use maintaining stability as a pretext to eliminate enterprises." Shi Bing's legal advisor believed that the legislative intent of the bankruptcy law focuses on rescuing corporate entities rather than eliminating them.
Written materials provided by the Taoyuan County Court stated that the Common Creation bankruptcy case was an innovative exploration by the court.
Some experts believe that it is unprecedented in the history of global corporate bankruptcies for a "debtor" to apply for the bankruptcy of a "creditor," calling it a "curious talk."
From Honeymoon to Breakup
In Taoyuan, it was almost common knowledge that Common Creation Company and the government once enjoyed a "honeymoon" period. From company registration, land approval, to the issuance of presale permits for houses, all relevant government departments gave them a green light. On May 26, 2006, and April 11, 2007, the Standing Committee of the County Party Committee held two office meetings, positioning the pedestrian street as a public welfare project, an image project, and a key project, promising tax incentives, financial rewards, and improvements in supporting infrastructure to the developer.
A detail mentioned by many parties involved was that Urban Investment Company even lent 6.05 million yuan to Common Creation Company to help it settle disputes with a partner. "The loan agreement was written on the inner paper of a cigarette box at the time," said a knowledgeable person. This loan later became the basis for Urban Investment Company's application for Common Creation's bankruptcy.
However, good times didn't last long. In October 2007, Taoyuan County completed its leadership transition. Former County Party Secretary Wei Ligan was transferred to serve as a municipal inspector in Changde, former Deputy County Magistrate Xiong Fuxing stepped down, County Magistrate Zheng Dixin took over as County Party Secretary, and Li Weimin, Director of the General Office, joined the Standing Committee. Coincidentally, the central government tightened monetary policy at this time, and a loan of 38 million yuan by Common Creation Company failed to be disbursed on time, highlighting the funding crisis.
Informed sources analyzed that pushing Common Creation towards bankruptcy might involve power struggles and corruption among officials. On June 10, 2008, the Taoyuan County Party Committee held a meeting, forming a resolution to take criminal measures against Xiong Jianping, Shi Bing's husband. But Xiong told reporters that before this, County Party Secretary Zheng Dixin had been negotiating with him on how to deal with the high-interest part of social loans.
An interesting background is that Zheng and Shi Bing are from the same hometown, and Zheng Dixin worked alongside Xiong Jianping in the same office at the Dingcheng District Government of Changde City. However, there were grievances between the two. Additionally, multiple people confirmed that Zheng Dixin's brother, Zheng Diquan, runs an auction company locally.
Chen Yuelong, former Deputy Director of the Rural Economy Bureau of Taoyuan County and the first designated bankruptcy administrator for Common Creation Company appointed by the government, told the media in an interview that the remaining construction of the pedestrian street after the halt would require approximately 20 million yuan. "After I took over Common Creation, I raised 37 million yuan to complete the tail-end construction of the pedestrian street and handle some aftermath affairs. The funds mainly came from the fiscal budget, and additionally borrowed over 10 million yuan from Jiantian Cheng, representative of Yunnan Jin Dadian Investment Company."
An original document signed on May 13, 2008, provided by Common Creation Company showed that Common Creation borrowed 30 million yuan from Jiantian Cheng, of which 20 million yuan had been deposited into a special account designated by the county government - the Taoyuan County State-Owned Assets Investment and Operation Co., Ltd. account. On the loan agreement, there was Li Weimin's signature as a witness.
"Of the 20 million yuan, 6.51 million yuan had been spent on project settlement, and the remaining amount was sufficient to complete the tail-end construction of the pedestrian street," Shi Bing said. "The loan was personally handled by Xiong Jianping. At the time, Jiantian Cheng sent two Mercedes-Benz cars to pick him up at the airport, giving the impression of strong financial backing."
Li Weimin told the media that the loan cooperation was arranged by the government to help Common Creation solve its funding problems, but ultimately failed due to issues with collateral, with only 6.51 million yuan actually received.
Jiantian Cheng is from Taoyuan County, and locals confirmed to the reporter that he has ties with several government officials.
Shi Bing and her husband Xiong Jianping believed that borrowing from Jiantian Cheng led to the bankruptcy of Common Creation. She recalled that on a day at the end of May 2008, Li Weimin, Jiantian Cheng, and Jiantian Cheng's agent lawyer Zhou Wenfeng met with him at the County National Tax Restaurant, proposing that Common Creation go bankrupt and offering him some compensation, which he refused.
"By the time Common Creation was declared bankrupt, the project was 90% complete, and sales would yield nearly 100 million yuan in profit." Shi Bing pointed directly to the bankruptcy as a malicious seizure, "a conspiracy orchestrated by individuals for their own gain using administrative means to interfere with the judiciary."
According to the description in the "Civil Ruling" issued by the Taoyuan County Court, Urban Investment Company filed for bankruptcy liquidation because Common Creation Company failed to repay the 6.05 million yuan debt on time. The court believed that Common Creation Company "was unable to repay due debts and clearly lacked the ability to repay, meeting the conditions for bankruptcy," and determined that "as of July 15, 2008, the total assets of the respondent Common Creation Company were 180,004,443.13 yuan, total liabilities were 199,542,269.77 yuan, owner's equity was -19,537,826.64 yuan, and the asset-liability ratio reached 110.86%, indicating a worsening financial situation," thereby declaring Common Creation Company bankrupt.
However, Common Creation Company did not recognize the legality of this ruling. Shi Bing believed: The court declared Common Creation Company bankrupt on June 22, 2009, but by then, the Taohuayuan Commercial Pedestrian Street was already fully completed, and Common Creation Company's assets far exceeded its liabilities; the court moved the time point for recognizing Common Creation Company's assets and liabilities back to July 15, 2008, when the bankruptcy application was accepted, and did not count the assets obtained from the administrator's decision to continue operations as Common Creation Company's assets, clearly violating the law.
The reporter's investigation found that after the court accepted Urban Investment Company's bankruptcy liquidation application for Common Creation Company, only one creditors' meeting was held, but this meeting did not substantially verify the claims, and the court did not rule on the creditor list. Since the first creditors' meeting, three different "creditor lists" have appeared, and the local court directly declared Common Creation Company bankrupt without verifying the claims.
Shi Bing pointed out that the administrator's work was chaotic, with neither the finance group nor the audit group under the control of the administrator but instead controlled by a certain Standing Committee member of the County Party Committee. Even more surprisingly, without submitting the liquidation plan for the bankruptcy estate to the creditors' meeting for discussion, the Taoyuan Court replaced "rulings" with "approvals" and approved the administrator to sell the bankrupt's property through an auction.
What Shi Bing could not tolerate was that the third creditor list prepared by the administrator increased the claims, negating the preliminary conclusions reviewed by the administrator, the creditors' committee, the creditors' representatives, and the employee representatives regarding the second creditor list.
These "oversights" by the court were seen by Shi Bing as the basis for judicial misconduct.
Shi Bing pointed out: "In the first creditor list prepared by the administrator, the homebuyers' purchase payments were listed as general claims, but the corresponding properties were not listed as assets of Common Creation Company. This was done under the instruction of the party committee and government to shrink assets and expand liabilities to facilitate the bankruptcy."
A reference point is that according to the "Creditor Statistics Table" dated November 10, 2009, issued by the bankruptcy administrator of Taoyuan County Common Creation Company, the total debt of Common Creation Company was recognized as 94,010,531.17 yuan, plus other payable debts, making the total debt of Common Creation Company less than 170 million yuan. On November 2009, the bankruptcy administrator of Common Creation Company commissioned the Taoyuan County Price Certification Center to assess the value of the unsold properties of Common Creation Company at 179.85 million yuan. At a hearing held by the court and the administrator on December 10, 2009, it was determined after the hearing that the market value of the unsold properties of Common Creation Company should be more than 223.09 million yuan.
Shi Bing said: "Adding the receivable balance of purchase payments of 32 million yuan, the assets of Common Creation Company exceed 250 million yuan, with assets exceeding liabilities by tens of millions of yuan."
Abnormal Bankruptcy?
In fact, the bankruptcy flag raised by the Taoyuan authorities did not fundamentally solve the problem of the pedestrian street. An unavoidable focus is that the case remains unresolved, and the completed pedestrian street cannot open on schedule.
In Shi Bing's view, using legal weapons to protect one's own rights is her final "trump card."
The China Legal Consultation Center of the Chinese Law Society invited multiple experts in civil and commercial law and bankruptcy law to conduct a special argument on this case, concluding that Urban Investment Company did not have the subject qualification to apply for the bankruptcy of Common Creation Company, and Common Creation Company had not incurred reasons for bankruptcy, thus the Taoyuan Court's acceptance was incorrect.
Coincidentally, Zheng Dixin also expressed on multiple occasions, "In the pedestrian street project, the credibility of both the government and the developer has been lost, and we can only rely on the credibility of the law." He told reporters in media interviews that the pedestrian street project involves the interests of four to five hundred business households, has been delayed for one or two years, and could trigger stability issues at any time. "Pushing Common Creation into bankruptcy was also our last resort."
During the handling of the Common Creation bankruptcy case, the pedestrian street builders visited the Changde municipal government multiple times, demanding settlement of construction payments. Shi Bing believed this was abnormal, "Construction payments, as priority claims, would not be affected whether or not bankruptcy occurs. Moreover, according to the original contract agreement to settle at a 99 quota standard reduced by 6%, the settlement has not been completed to date, and the creditors' meeting has not verified this claim."
However, for the Taoyuan government, stability outweighs everything, and forcefully pushing Common Creation into bankruptcy has become an official will.
On September 1, 2008, the Taoyuan County Government Legal Affairs Office reported in a situation report to the County Party Committee and County Government that if, after clearing and auditing the assets of Common Creation Company, the court finds that it does not meet the conditions for bankruptcy, the County Party Committee and County Government would face the predicament of homebuyers and builders protesting, the inability to recover financing during the bankruptcy review period, claims and protests from Common Creation Company, and the inability to finish and open the pedestrian street. It recommended making every effort to promote the bankruptcy liquidation process.
Informed sources told the reporter that to push Common Creation into bankruptcy, the Taoyuan County Party Committee has convened expanded Standing Committee meetings multiple times, with heads of public security, procuratorate, and court departments attending, being required to maintain high consistency with the County Party Committee and County Government. "If you don't change your thinking, you'll be replaced!"
On the first working day after the first creditors' meeting, Chen Yuelong was transferred to a remote Huangshi Reservoir to serve as head of the reform team. A detail Chen mentioned was that during the first creditors' meeting, he personally participated in escorting Shi Bing away. After Chen was transferred, Liu Longbao took over as team leader. On December 1, 2008, Zhou Wenfeng, the proxy lawyer for Jiantian Cheng, was appointed as the head of the comprehensive group of the bankruptcy administrator. When the Changde Intermediate People's Court approved the Common Creation bankruptcy case, the bankruptcy administrators designated by Linli County Bankruptcy Liquidation Affairs Office were mostly dismissed upon arriving in Taoyuan.
Various abnormal phenomena in the case handling process also drew stronger resistance from Common Creation Company, directly targeting County Party Secretary Zheng Dixin. In October 2009, after her daughter was questioned by Taoyuan police, Shi Bing publicly wrote an open letter to Zheng Dixin on the internet, accusing him of manipulating state machinery to handle cases illegally. Subsequently, an article titled "Taoyuan County Party Secretary and His Family Business" circulated on Tianya Forum, exposing Zheng's bribery of former Changde City Party Secretary Cheng Haibo for a promotion and his involvement in all key projects in Taoyuan County. The article was widely praised by netizens, receiving over 200,000 clicks within a few days.
Not long after Shi Bing posted her article, a friend of hers was suddenly interrogated by Taoyuan police in Shenzhen, and her residence was searched.
The main leaders of the Changde Municipal Party Committee and Political and Legal Affairs Commission, when interviewed by the media, expressed that they had repeatedly reminded the staff handling the Common Creation bankruptcy case that the case handling must withstand the test of time.