Local public entities in distress – a critical analysis of the PRC approach

The Chinese economic miracle has transformed the country at an unprecedented rate over several decades and reshaped the Chinese economy. These changes have simultaneously ushered in a range of legal reforms to address the regulatory needs of the changing economic environment, including the adoption of formal insolvency proceedings to liquidate or restructure struggling enterprises. Although the current insolvency regime is limited to business entities, China has recently adopted several reforms to its commercial laws and pilot programmes exploring personal insolvency.2 Some experts anticipate that future reforms may include adoption of insolvency proceedings for local public entities or the establishment of a credit system to determine if local public entities are in a position to incur additional debt and thereby prevent over leveraging of these local entities.