China's new bankruptcy rules will lift economic growth

Significance

Chinese law at the national level does not include provisions for personal bankruptcy. This prevents resolution of many insolvent companies that involve liabilities from heavily indebted individuals. There is no formal resolution of bankruptcies for sole traders and those unable to fulfil personal guarantees, nor a way for failed entrepreneurs and their families to make fresh starts.

Impacts

• Government efforts to promote entrepreneurship and innovation will have more success as trialling new ideas becomes less risky.
• Realising the full potential of the law will require changes in attitudes to personal bankruptcy and removal of associated stigma.
• Implementation will be slower and more difficult in less-developed regions of China that lack Shenzhen's experience.