This is an excellent book comprehensively examining the Chinese corporate bankruptcy law and investigating not only the law on the books but also the law in action. The most valuable contribution of this book is that many arguments rely on the first-hand data, both quantitative and qualitative, meticulously collected from official sources and fieldwork interviews. This evidence-based approach, deployed throughout the book, makes the analysis considerably insightful.
Natalie Mrockova essentially aims to demystify why the Chinese corporate bankruptcy law, including the China Enterprise Bankruptcy Law 1986 and its updated version of 2006, is not adequately implemented in practice, especially given the assumed economic benefits arising from an effective corporate bankruptcy system. Several ground-breaking constraints are discovered in her book, ranging from the perceived low debt recovery rates in corporate bankruptcies to the lack of training of insolvency practitioners.
Unlike similar books published recently, Corporate Bankruptcy Law in China expands and covers an examination of the Chinese judicial systems and lending practice, which makes it easy for the reader to appreciate the use of the Chinese corporate bankruptcy law against its political and economic backgrounds.
Chapter one, as the introduction, lays out the economic rationality of corporate bankruptcy law and explains how the data are collected, followed by four parts which in turn comprise of 12 substantial chapters. Chapter two sheds light on China's political, economic and legal contexts, paving the way for the in-depth grasp in later chapters over the challenges encountered in the implementation of the Chinese corporate bankruptcy law. The role played by the Chinese Communist Party in controlling, if not manipulating, the Chinese political, economic and judicial lives is vividly dissected in this chapter.
In chapter three, an overarching account on the debt finance and enforcement in China is concisely presented; the powerful data on the Chinese debt-to-GDP ratio at dangerous levels, particularly in the past decade, suggest that a functional corporate bankruptcy law is urgently needed in China more than ever and more than anywhere else. The insightful analysis starts from chapter four, which offers details on the dynamism of the use of the Chinese corporate bankruptcy law in everyday life; this chapter is perhaps the first in academic literature to pay attention to the so-called typical corporate bankruptcy cases approved and released by the China National Supreme People's Court in both 2018 and 2022, which serve as a kind of case law instructing how bankruptcy cases should be handled by local courts.
Chapter five is a transitional section, generally outlining the four factors hindering the use of the Chinese corporate bankruptcy law. Chapters six to nine examine these four constraints that lead to the inadequate implementation of the Chinese corporate bankruptcy law.
Chapter ten asserts the desirability of reforming the Chinese corporate bankruptcy law for the sake of sustaining the healthy economic growth in China, followed by chapter 11 which recommends several reform options. In chapter 12, Mrockova comments on some of the latest legislative and judicial initiatives to revamp the Chinese bankruptcy law, both corporate and personal. Finally, chapter 13 reviews how external and foreign players help reshape the making and use of the Chinese corporate bankruptcy law.
This book will undoubtedly enrich the academic debates on the development of the Chinese commercial law in general, and bankruptcy law in particular. However, the rich data empowering the persuasiveness of this book are also a double-edged sword. Some qualitative data, especially interviewee comments or observations, may be considerably controversial. This is not the author's fault but is the inevitable limit of empirical legal studies.
For example, to justify the effectiveness of the Chinese non-bankruptcy debt collection system, some interviewees (p. 170) recall the existence of the payment order procedure under the China Civil Procedure Law, which is essentially an expedited judicial mechanism to solve non-disputed debt claims. Yes, it is theoretically correct to say that this procedure exists, since it is written in law. But in practice, this is false, as the payment order procedure is shelved probably from the first day of its implementation; the court cannot financially benefit from this procedure and routinely ignores such a petition. My personal ten-year commercial law practice in China suggests that the payment order procedure is not what companies can access. We could not take what interviewees say at face value, and we need to examine their positions and their incentives, and even their fears when they are approached by interviewers.
Another example is that some interviewees (p. 65) give accounts suggesting that enacting both the China Enterprise Bankruptcy Law of 1986 and of 2006 is intended to create an effective debt collection system so as to promote economic growth in China. This is true, if you believe what is said in the CCP-controlled media reports or official documents. Again, these interviewees’ comments are politically correct but factually dubious. To a large extent, the making of the China Enterprise Bankruptcy Law of 1986 was to add a tool to the Chinese government economic management weaponry to discipline under-performing SOEs, and the 2006 Enterprise Bankruptcy Law is essentially window dressing, artificially fulfilling China's WTO commercial law reform promises. Such conclusions are reached because in practice it is not an exaggeration to say that the Chinese corporate bankruptcy law is not judicially available. Most, yes most, Chinese courts do not handle corporate bankruptcies for years, if not decades.
But these limits do not affect the excellent quality of this book, which is not only valuable for legal scholars to gain an insight on the Chinese commercial law and its implementation, but also is tremendously helpful for political scientists to understand the entanglement of politics and law in the Chinese context.
