Chinese lawmakers began their first review of draft amendments to the Enterprise Bankruptcy Law on Monday, seeking to address shortcomings in the market-exit mechanism, state media reported.
The amendments, discussed during the ongoing 17th session of the 14th National People’s Congress (NPC) Standing Committee, include more than 160 new or modified articles based on the current law that was enacted 18 years ago and features 216 articles, according to Xinhua.
Calling it the foundational legal framework for a market economy, Xinhua reported that the law has undergone “relatively comprehensive revisions”, though specific details of the changes were not disclosed.
“Since its implementation in 2007, the law has played a key role in facilitating the orderly exit of businesses, promoting fair competition, and optimising resource allocation, but it no longer meets the needs of current economic practices, necessitating urgent revisions,” Xinhua said.
Yuan Jia, an associate professor specialising in economic law at Sichuan University, said the amendments were necessary to enable struggling businesses to systematically exit the market amid China’s economic slowdown and its transition towards a technology-driven, high-quality economy.
“In the current economic environment, revising the law is critical to allow businesses facing operational difficulties or lagging in technological innovation to exit the market in an orderly manner,” he said.
“This will help clear economic bottlenecks and eliminate ‘zombie enterprises’ while better protecting the rights of stakeholders,” he said, referring to financially insolvent companies that continue operating despite being unprofitable.
