China's Tianjin Owned Biggest Steel Enterprise Bohai Steel Files for Bankruptcy

According to the latest reports, Bohai Steel, the biggest state-owned steel company in Tianjin, has begun to file for bankruptcy, in a process that will affect 48 factories and 105 creditors in Tianjin, a port city of 15 million people located near Beijing.

Bohai Steel's bankruptcy process, which began in September, could have serious repercussions for the Tianjin financial sector, as it owes debts to seven major regional banks, including the Beijing Bank, Tianjin Bank, Tianjin Binhai Rural Commercial Bank, China Construction Bank, Shanghai Pudong Development Bank, Industrial Bank, and Bank of China.

Bohai Steel's bankruptcy process, which began in September, is likely to have serious repercussions for the Tianjin financial sector, as it owes debts to seven major regional banks, including the Beijing Bank, Tianjin Bank, Tianjin Binhai Rural Commercial Bank, China Construction Bank, Shanghai Pudong Development Bank, Industrial Bank, and Bank of China.

The Beijing Bank, Tianjin Bank, and Tianjin Binhai Rural Commercial Bank each own more than 10 billion yuan (about USD 1.5 billion) of Bohai Steel's debt, while each of the other four banks owns 6 to 10 billion yuan of debt.

Bohai Steel was founded in July 2010 by the Tianjin government through the merger of four major local state-owned steel companies--Tianjin Steel Pipe Group, Tianjin Iron & Steel Group, Tianjin Tiantie Metallurgy Group, and Tianjin Metallurgy Group.

With its inception, Bohai Steel received a 100 billion yuan credit limit from state-owned banks. With robust support from the Tianjin government, Bohai Steel received credit from different financial entities, but the company ran into operational difficulties from day one and by the end of 2015, Bohai Steel owed 200 billion yuan to its creditors.

In January 2016, the Tianjin authorities organized a meeting of financial entities, where the latter were asked to commit long-term and constant support to the steel industry. The meeting caused alarm among executives, and some entities withdrew credit from Bohai Steel. In an effort to save the company, the Tianjin government tried to swap Bohai Steel's debt for stock, but that effort failed as well.

Bohai Steel is country's third-largest state-owned steel enterprises and Tianjin's biggest state-owned company to go bankrupt in the last two years. Dongbei Special Steel filed for bankruptcy in 2016 after Chairman Yang Hua committed suicide in March 2016. Chongqing Iron and Steel went bankrupt in July 2017.

Tianjin is a coastal metropolis in northern China and one of the nine national central cities of the country. It is one of the four municipalities that are administered at the provincial level by the Chinese regime.