A PRACTICAL EVALUATION OF THE PEOPLE’S REPUBLIC OF CHINA’S 2007 ENTERPRISE BANKRUPTCY LAW

Rakhi Patel
Vol. 10
January 2010
Page
China's first Enterprise Bankruptcy Law was promulgated in 1986 on a trial basis and since then has been through two major revisions before the passage of the 2007 Enterprise Bankruptcy Law. Rather than addressing bankruptcy of just state owned enterprises (SOEs), the 2007 law applies more expansively to all types of business enterprises, including non-state-owned enterprises and financial institutions. This new law is similar to the United States' Chapter 11 and, for the first time, allows for foreign owners and creditors to claim rights to assets owned in China and for secured creditors to maintain their claims ahead of employees.

Previous scholarship has given attention to the scope of bankruptcy law's various iterations over the past twenty years in China and provided possible reasons for various deficiencies. This article adds to the literature by analyzing why China's most recent bankruptcy law still may not work as it is intended to by its drafters or as bankruptcy law does elsewhere. The current global financial crisis and rising number of bankruptcies throughout China provide a lens through which to determine whether the new law is working.