"A small number of trust and investment firms will be closed after rectification and the repayment of this part of international debt should be subject to consultations between creditors and debtors," Dai told a news conference.

"If the negotiation fails, after applying for Central Bank approval, they can go through the bankruptcy procedure in accordance with the law," he added.

"I suspect HITIC will be closed and the settlement of their debts should be carried out in accordance with the principles I mentioned."

HITIC missed an interest payment on a 14.5 billion yen ($134 million) Samurai bond last week.

Officials have said the Hainan provincial government has setup a clearing institution to aid the restructuring of HITIC, but not when, or if, the trust would meet its obligations.

HITIC was due to make a payment to holders of the 1994 Samurai bond on June 26.

Under the original terms, the trust was technically in default from midnight on July 10 after it failed to pay interest within 14 days.Payment agents for HITIC's Samurai issues - Shinsei Bank and Sumitomo Bank - said last Thursday the trust had delayed payment, clearing the way for the bond to be declared in default.

Either the payment agents or bond holders can now officially declare default after holding a meeting. "Special attention should be paid to the settlement of Samurai bonds held by individual investors," Dai said. "In general, both the central government and legal departments insist on repayment in accordance with the law to protect the interests of creditors."

-- (Reuters)