Startling achievement

Author: | Published: 1 Jul 2007

Tom Young
Staff writer Asia

During the Asian financial crisis, China's 1986 Enterprise Insolvency law was shown to be useless. Gitic's high profile bankruptcy showed the rights of foreign creditors, who had made loans to Gitic's Hong Kong subsidiaries, to be almost non-existent. Under the old law, restructuring was not an option either, covering only liquidation. So now, after 12 years of drafting, three controversial readings at the National People's Congress Standing Committee, and a nine-month delay between promulgation and implementation, China's new enterprise bankruptcy law is here.

And it's an impressive feat. In a country often derided for its isolationist and protectionist corporate laws, the granting of pari passu for foreign creditors will be greeted with open arms by investors and their restructuring lawyers. But the law is offering more than mere comfort, it has wider implications: it may finally offer foreign courts a window into China's cloudy judicial system,...