Bankruptcy Law in China

Abstract

This thesis focuses on the Enterprise Bankruptcy Law of the People’s Republic of China (Trial Implementation) (the “1986 Bankruptcy Law”), its textual stipulations, its instrumental application and under-utilization, and concludes with suggestions for future reforms. This thesis starts with a brief review over China’s economic reform since the 1980s. Following the successful agricultural reform in the countryside, China started a new round of more dramatic reform in the public industrial sector beginning in 1984. As the reform progresses, bankruptcy came to the forefront as the state hoped it would force the SOEs either to improve their management or face the specter of bankruptcy. The reality shows, however, that the law has not achieved its proposed goals. Empirical research reveals that government has applied it selectively rather than automatically. The recent Guangdong International Trust and Investment Company (“GITIC”) bankruptcy case shows how the law is being used by the central government to recentralize the country’s financial control. Empirical study also reveals that the law is also being selectively used to help the government restructure the country’s industrial structure. The reasons behind this failure of application include both technical impediments inherent to law (such as the defects in commencement proceedings, loopholes in the