Tech Giants: Starting from Bankrupt Companies

71: Chapter 71: The Imperial Court and the Martial WorldMinistry Coordination Meeting (July 5th Afternoon, Kyoto)

Almost at the same time as the internal meeting at Xingchen, a more complex game was playing out in Kyoto, two thousand kilometers away.

In a small conference room at SASAC, smoke filled the air. Representatives from six ministries sat around, files spread out before each of them, the water in their teacups already cold.

Xu Jianguo stubbed out his third cigarette and rubbed his temples: ”Everyone, you all know the situation. The three conditions put forward by Xingchen: debt stripping, employee diversion, and transfer of qualifications. We must have a preliminary consensus today, otherwise, they won’t wait.”

Director Li from the Ministry of Finance was the first to speak, his tone firm: ”Debt stripping can be discussed, but the state cannot bear it all. 58.2 billion in liabilities; stripping 80% as requested by Spark Group means 46.6 billion. Who is going to pay this money? The treasury? Or should we let the banks take the bad debt?”

He opened the internal calculations of the Ministry of Finance: ”If the treasury assumes it all, it’s equivalent to every taxpayer paying 35 yuan for this. And if we open this floodgate, what about other struggling state-owned enterprises? Will they all come asking for relief?”

Director Wang from the MIIT was relatively mild: ”But from the perspective of technical assets, Shenyang Machine Tool is indeed valuable. Those military industry processes and the teams of Old Master Craftsmen are all strategic assets of the country. If we go through complete bankruptcy liquidation, these intangible assets will be reduced to zero. Considering the country’s long-term interests, it is necessary to preserve the spark.”

”But how do we preserve it?” Deputy Director Zhang from the Ministry of Human Resources and Social Security said anxiously, ”30,000 employees, behind them are 30,000 families. Xingchen is only willing to take half; what about the remaining 15,000? The employment situation in the Northeast is already severe; if there are large-scale layoffs, the pressure on social stability will be enormous.”

She brought up the data: ”The unemployment rate in Tiexi District, where Shenyang Machine Tool is located, has already reached 12%. If we add another 15,000 people, it might trigger regional social risks. Who will bear this responsibility?”

Deputy Director Liu from the NDRC spoke from a macro perspective: ”In the ’Made in China 2025’ plan, high-end CNC machine tools are one of the ten key areas. If we can’t even protect Shenyang Machine Tool, how can we talk about being a manufacturing powerhouse? But the problem lies in the method—we cannot follow the old path again, where the state injects capital, state-owned enterprises take over, and in the end, we fall back into the same cycle.”

He looked at Xu Jianguo: ”Mixed-ownership reform is a direction. But the prerequisite for reform is that the new entity must have real operational autonomy. I understand and support the ’absolute autonomy in personnel rights’ requested by Xingchen. If we don’t break the iron rice bowl, we can’t reform.”

The meeting reached a stalemate.

Every ministry agreed that it ”should be saved,” but everyone hoped that ”others would bear a bit more”: the Ministry of Finance didn’t want to pay, the Ministry of Human Resources and Social Security feared stability pressure, the MIIT wanted the technology but didn’t want the burden, and the NDRC wanted reform but feared the risks.

Xu Jianguo watched this scene, a deep sense of powerlessness welling up in his heart. This was the dilemma of the system: everyone was right, everyone stood on the position of their own duties, but when put together, it was unsolvable.

”I’ll propose a plan,” Xu Jianguo finally said. ”Establish a ’Shenyang Machine Tool Restructuring Special Leading Group’ to coordinate across ministries. For the debt issue, let the Ministry of Finance take the lead, join forces with the four major asset management companies, and design a tiered takeover plan—extend the maturity of high-quality debt for banks and have the AMCs take over the bad debt. For employee resettlement, let the Ministry of Human Resources and Social Security take the lead and design a combined plan of ’training for job transfers + early retirement + entrepreneurial support.’ For technical asset transfer, let the MIIT take the lead to ensure a smooth transition of military industry qualifications.”

He paused: ”But all of this requires a prerequisite: Xingchen must promise that after taking over Shenyang Machine Tool, it will achieve profitability within five years and increase the localization rate to over 90%. This is both an account to the state and proof for the reform.”

”What if Xingchen doesn’t agree?” someone asked.

”Then this project will be difficult,” Xu Jianguo said with a wry smile. ”They are a private enterprise and have no obligation to be the scapegoat for the state. All we can give is policy space and strategic endorsement. The rest depends on the entrepreneur’s sentiment and courage.”

The meeting ended in the evening. No specific agreement was reached, but a ”principled consensus” was formed—in Chinese officialdom, this usually means ”everyone agrees it should be done, but we’ll talk about how later.”

Xu Jianguo returned to his office, looking at Chang’an Avenue in the twilight outside the window. He knew that the real difficulty had only just begun.

On the morning of July 6th, the official website of Finance Weekly published an exclusive report:

[Private Enterprise Gambles 50 Billion to Save State-Owned Enterprise: Inside Story of Xingchen’s Planned Acquisition of Shenyang Machine Tool]

The article detailed the specifics of the acquisition negotiations: 58.2 billion in debt, 30,000 employees, Su Chen’s three conditions, and the disagreements at the ministry coordination meeting. The reporting was calm, but the headline was already shocking enough.

A single stone stirred up a thousand waves.

At nine in the morning, the top three on the Chinese microblogging platform trending list were:

#Xingchen Takes Over Shenyang Machine Tool# (Explosive)

#Where Will the 30,000 Workers Go#

#Should Private Enterprises Save State-Owned Enterprises#

Public opinion instantly split.

The patriotic sentiment faction quickly seized the moral high ground:

@IndustrialPowerhouseDream: ”Support Xingchen! We cannot let the ’Father of Chinese Machine Tools’ die in the hands of our generation! Well done, Su Chen!”

@NortheastOldIndustrialBase: ”I am from Shenyang; my grandfather and father both worked at the machine tool factory. Please, Xingchen, save the factory, save those Old Master Craftsmen!”

@MechanicalEngineerXiaoWang: ”From a technical perspective, the accumulation of Shenyang Machine Tool is indeed precious. If Xingchen can activate it, it will be a major boon for Chinese manufacturing!”

The market rationality faction countered:

@FinanceColdEye: ”Business operation is not charity! 58.2 billion in debt, 30,000 old employees—this is a bottomless pit! Who will guarantee Xingchen’s interests?”

@InvestorOldZhang: ”Beware of moral kidnapping! If a state-owned enterprise is managed poorly, let a private enterprise take over. If they manage it well, it’s expected; if they mess it up, it’s the private enterprise’s incompetence—what kind of logic is this?”

@LegalPerspective: ”This involves the transfer of tens of billions in state-owned assets. Is the procedure compliant? Is there any transfer of benefits? I suggest the National Audit Office intervene!”

Conspiracy theorists were not absent either:

@DeepDiggerEmperor: ”What Xingchen really wants is the military industry qualification, right? With that, they can enter the military procurement system, which is a market worth hundreds of billions every year!”

@NorthernObserver: ”Southern capital moving north to harvest high-quality assets? Beware of a new round of ’loss of state-owned assets’!”

@TruthIsOnlyOne: ”I heard Xingchen wants to purge all management. This is to carry out a ’major reshuffle’ to make it convenient to install their own people, right?”

Short video platforms were even more chaotic. Some uploaded desolate footage of the Shenyang Machine Tool factory area with tragic music; some edited clips of Su Chen’s speeches to shape the image of a ”national entrepreneur”; some self-media ran to the gate of Shenyang Machine Tool and found a few laid-off workers to hold signs: ”We want jobs, don’t abandon us”—later it was revealed by netizens that the people holding the signs were not factory workers at all, but extras.

Public opinion was fermenting, twisting, and magnifying.

The Spark Group public relations department responded urgently but found that whatever they said was wrong: saying ”we are evaluating” was interpreted as ”hesitant and lacking responsibility”; saying ”refer to the announcement” was scolded as ”cold-blooded bureaucratic”; remaining silent was said to be ”guilty and defaulting.” Pressure poured in from all sides.

Just when public opinion was almost out of control, a turning point appeared.

At ten in the morning on July 7th, the chairman of Sany Heavy Industry released an open letter through the company’s official website:

[To Chairman Su Chen of Spark Group: Chinese Equipment Manufacturing Should Move Forward Together]

The letter was short but very weighty:

”Having learned that Xingchen Heavy Industry is considering the acquisition of Shenyang Machine Tool, as a peer, I know the difficulties involved. Sany Heavy Industry is willing to promise here: if the acquisition is successful, Sany will purchase no less than 500 million yuan worth of CNC equipment from the restructured Shenyang Machine Tool within the next five years. Chinese equipment manufacturing needs leaders, and it also needs an ecosystem. Supporting Xingchen is supporting the future of Chinese manufacturing.”

This letter was like a signal flare.

Two hours later, XCMG Group followed up with a statement: ”Support market-oriented restructuring. If the project lands, XCMG will prioritize purchasing Shenyang Machine Tool products to jointly promote the progress of domestic high-end equipment.”

In the afternoon, Zoomlion, Sunward, Liugong, and a batch of other equipment manufacturing enterprises expressed their positions one after another, forming a rare ”industrial alliance” in support.

What was even more surprising was the Shenzhen Entrepreneurs Chamber of Commerce. On the afternoon of July 7th, the chamber released a joint letter, signed by over thirty well-known entrepreneurs including Mr. Ren, Ma Huateng, and Wang Chuanfu:

[Joint Initiative on Supporting Private Enterprises’ Participation in State-Owned Enterprise Reform]

”We support Xingchen Heavy Industry’s participation in the restructuring of Shenyang Machine Tool based on market-oriented principles. This is not just saving an enterprise; it is exploring a new path for mixed-ownership reform. We call for: giving reformers enough space, letting the market play a decisive role in resource allocation, and at the same time better playing the role of the government.”

The joint letter was reprinted by major media as headlines.

Public opinion began to shift subtly.

From the initial ”should they save it or not,” it gradually evolved into ”how should they save it.” From pure emotional venting, rational discussions began to emerge: How to restructure the debt? How to resettle employees? How to transform technology?

Professional analysis posts appeared on the Chinese microblogging platform:

@IndustrialEconomicsScholar: ”The core problem of Shenyang Machine Tool is the system. If Xingchen goes in, it must obtain the ’three rights’: personnel rights, distribution rights, and decision-making rights. Otherwise, it will surely fail.”

@LegalPractice: ”According to the ’Enterprise State-owned Assets Law,’ such restructuring can adopt the ’asset package’ model, separating high-quality assets from bad assets...”

@NortheastRevitalizationResearch: ”This is not just enterprise restructuring, but a test for regional economic transformation. It is recommended to introduce a supporting ’Northeast Talent Return Plan’...”

The chaotic public opinion field began to see constructive voices.