Chinese Bankruptcy Law in an Emerging Market Economy : The Shenzhen Experience

In 1986, the People's Republic of China enacted its first national bankruptcy law, the Law of the People's Republic of China on Enterprise Bankruptcy, as part of an emerging legal framework for the country's transition from a planned economy to a market economy. At the time of its enactment the bankruptcy law was considered a significant political and economic breakthrough that was necessary to apply some market pressure on China's State-Owned Enterprises (“SOEs”) to force them to become more efficient. However, the rapid development of economic reforms in China soon exposed serious limitations in the bankruptcy law: This article discusses the bankruptcy law and practice in the Shenzhen Special Economic Zone, which offers an interesting and informative comparison and perhaps some lessons for China in reforming its national bankruptcy law. The article also sets out the results of a research project organized by the Faculty of Law at the University of Hong Kong and the Department of Economic Law at the China University of Politics and Law in Beijing that involved conducting interviews from February 16-18, 2000, of members of the Shenzhen judicial, legal, and political branches who are familiar with bankruptcy law and practice in Shenzhen