Why China needs a bankruptcy code

Author: Brian Yap | Published: 2 Jun 2017

China has taken multiple regulatory steps in a joint effort to tackle insolvency issues plaguing its banking sector, but a bankruptcy regime is needed.

The China Banking Regulatory Commission (CBRC) issued a notice last July announcing the regulator’s legislation plan for dealing with PRC commercial banks’ bankruptcy risks. This came more than a year after the State Council issued the deposit insurance rules for the first time, aimed at providing legal recourse to depositors seeking compensation from a failed bank.

But counsel in Greater China argue that, without a formal bankruptcy regime, there are limited and sometimes ineffective methods that the government could use to address bankruptcy issues.

"Before any legislation is formally promulgated, there are limited numbers of methods to help troubled banks other than capital injections or merging them with healthier ones," said Rose Zhu, partner at Baker McKenzie....