"Sanlu would have very likely be declared bankrupt at 10 am today, but it is still negotiating with the court," an insider told Shanghai Securities News yesterday. One of Sanlu's suppliers confirmed that the process will be complete in one or two days.

Many Shijiazhuang-located small and medium-sized enterprises that had business with Sanlu are in difficulties. A company that provided additives to Sanlu will also be declared bankrupt.

Once the bankruptcy procedure starts, Sanlu has to compensate its creditors, hand over income taxes and pay its employees. Sanlu will also be responsible for its sales agents, for bank debts, and for the sick children.

Mei Xinyu, a researcher with the Ministry of Commerce, said that if Sanlu went bankrupt, Sanyuan would put aside its debts and start an acquisition procedure. "Stockholders and government would like Sanyuan to purchase Suanlu's equity, but the cost is too high for the buyer," noted Mei. It is rumored that Sanlu will be liable for 900 million yuan in compensation claims over the tainted milk scandal.

New Zealand's Fonterra is also a shareholder of Sanlu. A senior manager of its China zone stated that the volatile situation makes it difficult for Fonterra to be clear about the precise position with regard to Sanlu's bankruptcy.

Fore more details, please read the full story in Chinese. (http://paper.cnstock.com/html/2008-12/24/content_66738600.htm)

(China.org.cn December 24, 2008)