Fast forward to today, and Hill’s investment has become a cautionary tale that’s got foreign investors everywhere asking tough questions about doing business in China. At 86, Hill isn’t just out his money – he’s watching a company that was supposedly liquidated three years ago somehow still churning out pork products.
The Shocking Discovery: A “Liquidated” Company Still in Business
Here’s where things get really weird. In June 2024, nearly four months after Chinese courts had officially declared Dalian Chuming’s liquidation complete and done with, Hill got some jaw-dropping news. China’s own food regulator confirmed the company was still very much in business.
We’re not talking about some paperwork mix-up here. The company had fresh health and safety certificates dated June 2024, proving they’d passed recent inspections. Even stranger? Walk into any market around Dalian last November, and you could still buy pork with Chuming’s name on it, packaged as recently as May 2024.
This isn’t just bureaucratic confusion – it’s a fundamental breakdown of how bankruptcy is supposed to work.
Background: From Profitable Supplier to Bankruptcy Filing
Let’s rewind to better times for Chuming. This wasn’t some fly-by-night operation. The company had built solid relationships with major retailers, including Walmart, and was actually making money as recently as 2016.
But here’s the red flag that should have worried investors: despite being profitable, Chuming hadn’t paid dividends in years. When the bankruptcy filing hit in 2019, it blindsided foreign investors who’d bought in through Energroup Holdings, a U.S.-listed company.
Looking back, the timing seems suspicious. Why would a profitable company with established customers suddenly need bankruptcy protection?
The Liquidation Process: Three Years of Asset Auctions
After the 2019 bankruptcy filing, things moved slowly through China’s legal system. It wasn’t until 2021 that a Dalian court formally ordered liquidation – a process that was supposed to take three years and leave nothing behind.
The court-supervised liquidation should have been straightforward: sell everything, pay the creditors, and close the books forever. For investors like Hill, this meant accepting their losses and moving on.
Except that’s not what happened. While the legal paperwork said one thing, reality was telling a completely different story.
Foreign Investors Left in the Dark
Hill’s experience shows just how vulnerable foreign investors can be in situations like this. His investment went through Energroup Holdings, creating layers of separation between him and the actual Chinese company.
“I feel cheated,” Hill told reporters, and who can blame him? The man is 86 years old and was hoping to leave something for his kids. Instead, he’s stuck watching a supposedly dead company continue operating while his investment vanished into thin air.
This kind of indirect investment structure is common for foreign money flowing into China, but it creates blind spots that can be exploited when things go wrong.
Evidence of Continued Operations
The evidence that Chuming kept operating after liquidation isn’t subtle. Reuters reporters found an active factory at the company’s registered address in March 2024, complete with Chuming logos – though the official company name had been tweaked to “Dalian Chengsan Chuming Food Processing.”
Walk through three different markets and a grocery store in Dalian, and you’ll see Chuming signs prominently displayed where pork is sold. Sure, the actual product labels might show a different company name in Chinese characters, but the Chuming branding is right there for everyone to see.
This isn’t some accidental oversight – it looks like a deliberate strategy to keep the business running under a legal technicality.
Legal Loopholes in China’s Bankruptcy System
The Chuming mess exposes some serious problems with how China handles bankruptcies. According to investor complaints, the company never got proper shareholder approval for the bankruptcy filing – something that’s actually required under Chinese law.
Even worse, shareholders say they were blocked from accessing financial records during the bankruptcy process. How are investors supposed to verify anything when they can’t even see the books?
Legal experts are pointing to these enforcement gaps as evidence that China’s bankruptcy system can be gamed by companies looking to dodge their obligations or by insiders trying to grab assets on the cheap.
Rising Bankruptcy Cases Signal Broader Issues
China’s bankruptcy courts are drowning in cases. The numbers tell the story: over 30,000 bankruptcy filings in 2024, compared to just 10,000 in 2020. That’s a three-fold increase in four years.
This explosion in bankruptcies reflects the broader economic pressures hitting Chinese companies as the economy slows down. Real estate companies grabbing headlines with spectacular collapses are just the tip of the iceberg.
The question is whether China’s legal system can handle this flood of cases while maintaining proper oversight. The Chuming case suggests the answer might be no.
Impact on Foreign Investment Confidence
Stories like Hill’s are making foreign investors think twice about putting money into Chinese companies. When you can’t trust that a court-ordered liquidation actually means liquidation, what can you trust?
Many foreign investors report that Chinese courts seem to favor local interests over foreign shareholders when disputes arise. This perceived bias is creating a risk premium that makes Chinese investments less attractive.
At a time when China needs foreign capital to fuel growth, cases like Chuming are sending exactly the wrong message to international investors.
The Need for Reform and Transparency
The writing is on the wall: China needs to fix its bankruptcy system if it wants to maintain credibility with foreign investors. The current system, which operates under different principles than Western markets, is creating too much uncertainty for international money.
Legal experts are calling for reforms that would enhance transparency and provide better protection for investor rights. Without these changes, China risks pushing away the foreign investment it desperately needs.
The government’s response to these growing concerns will likely determine whether foreign investors continue to see China as an attractive destination or start looking elsewhere for opportunities.
