Default and Bankruptcy Resolution in China

Abstract

In this article we review the literature on the recent growth of corporate debt in China, and present stylized facts on the evolution of debt composition, non-performing loans, defaults, and bankruptcy filings. We then describe the legal and political institutions that characterize the system for restructuring and liquidating financially distressed firms, including recent reforms of China's bankruptcy law. Finally, we discuss the main challenges faced by China in the implementation of these reforms, including frictions in judicial enforcement. We also propose potential avenues for future research.

Keywords: Bankruptcy law, non-performing loans, shadow banks, bond markets, default, restructuring.

JEL Classification: G33, G28, K22, O16