China’s Covid-19 Response: The Role of Bankruptcy Law and ‘Typical’ Cases

Abstract

This article examines responses to the Covid-19 crisis in China in the context of emerging corporate bankruptcy law and practice as demonstrated by the Supreme People’s Court selection and publication of eight ‘typical cases’ involving enterprises in financial difficulty during the pandemic. The article analyses the differences between ‘guiding’ cases, which have the greatest precedential value, and ‘typical’ cases and the potential for typical cases to affect the approach of lower courts to bankruptcy cases both during and after the pandemic, which coincided with a significant increase in the number of formal bankruptcy filings in China. We find that the courts claim an important coordinating role in the typical cases and openly apply the law as set out in the Enterprise Bankruptcy Law flexibly – with a focus on reorganisation-type proceedings – and that social stability remains a paramount objective. The strategic use of bankruptcy law as part of the response to the crisis and the publication of these cases by the Supreme People’s Court underscore the increasing sophistication of China’s corporate bankruptcy law and practice and the continuing role of the state in encouraging the use of debt workout and restructuring techniques within a robust, yet controlled, environment.