NPC weighs momentous new bankruptcy law By Li Jing (China Daily) Updated: 2004-06-22 00:11
After a decade of work, China's new bankruptcy law finally came before the
country's top legislature Monday.
The draft law, regarded as underpinning the way businesses will account for
themselves in China's market economy, will apply to all enterprises-- whether
State-owned, private or foreign firms.
The aim is to put them on the same footing in terms of competition, said Jia
Zhijie Monday in his report to the Standing Committee of the National People's
Congress (NPC).
Jia is the vice-director of the NPC's Financial and Economic Committee. That
body has been drafting the new bankruptcy law since 1994.
Besides the draft bankruptcy law, issues concerning agriculture, the
countryside and farmers are also drawing great attention from legislators
participating in the 10th NPC's Standing Committee latest session, which began
on Monday.
They will review reports on implementation of the land management law, the
government's favourable agricultural policies and financial aid for farmers
during their five-day session.
The lawmakers will also hold a second round of deliberations on the draft law
on promoting agricultural mechanization, draft amendments to the Law on
Contagious Diseases Prevention and Control, and a draft law on online
signatures.
China's current bankruptcy law was promulgated in 1986 for trial
implementation when the country's economic reform effort was still in its
infancy.
Widely regarded as outdated, the law fails to give sufficient protection to
creditors and only touches upon State-owned enterprises (SOE).
Bankruptcy for non-SOEs is stipulated in the Civil Procedure Law, Company Law
and Measures on Liquidation Procedures for Foreign Investment Enterprises, each
contains some articles in relation to insolvency without going into much detail.
Analysts say the new bill will integrate the country's inconsistent
bankruptcy legislation and give the same floor to the nearly 8 million
enterprises nationwide.
However, the draft gives an exception to around 2,000 SOEs underlined by the
State Council, in line with the previous administrative closure measures.
These money-losing SOEs are the last group to go bankrupt with government
bail-outs and the work will be finished in the next three to five years, an
official with the Commission for Supervision and Management of State-Owned
Properties under the State Council said Monday.
Except the 2,000 SOEs that are mainly military and mining factories, ll8
million companies in China will be required to follow a unified corporate
bankruptcy law if the firms go under, an official who declined to be named
said.
It means that China's more than 100,000 remaining SOEs will become "equal
competitors" in the market economy rather than being sheltered by the
government, said Li Shuguang, a drafter of the bill and vice-president of the
Postgraduate School of the China University of Politics and Law.
"From administrative closure to law-based bankruptcy, the landscape of a
market economy is more clear in China," Li said.
Commission statistics show that by April 2004, China had closed 3,377
insolvent SOEs through administrative intervention, allocated 49.3 billion yuan
(US$6 billion) as SOE bankruptcy subsidies and allowed State-owned banks to
write off a total of 223.8 billion yuan (US$27 billion) in bad loans caused by
SOEs bankruptcies.
The legislators are also expected to ratify a consular agreement between
China and New Zealand, protocol on revising the Shanghai Convention on Combating
Terrorism, Separatism and Extremism signed on June 15, 2001 in Shanghai,
protocol on revising the Shanghai Co-operation Organization (SCO) Charter, and
protocol on revising the agreement on the establishment of a regional
anti-terrorism agency, agreed to by SCO member countries on June 7, 2002 in St.
Petersburg.
Other major items to be reviewed or awaiting ratification at the meeting
include the Stockholm Convention on Persistent Organic Pollutants and the Beibu
Gulf demarcation agreement between China and Viet Nam, as well as State Council
reports on last year's final accounting of revenue and expenditures and the use
of the central budget for 2003.
Commission statistics show that by April 2004, China had closed 3,377
insolvent SOEs through administrative intervention, allocated 49.3 billion yuan
(US$6 billion) as SOE bankruptcy subsidies and allowed State-owned banks to
write off a total of 223.8 billion yuan (US$27 billion) in bad loans caused by
SOEs bankruptcies.
The legislators are also expected to ratify a consular agreement between
China and New Zealand, protocol on revising the Shanghai Convention on Combating
Terrorism, Separatism and Extremism signed on June 15, 2001 in Shanghai,
protocol on revising the Shanghai Co-operation Organization (SCO) Charter, and
protocol on revising the agreement on the establishment of a regional
anti-terrorism agency, agreed to by SCO member countries on June 7, 2002 in St.
Petersburg.
Other major items to be reviewed or awaiting ratification at the meeting
include the Stockholm Convention on Persistent Organic Pollutants and the Beibu
Gulf demarcation agreement between China and Viet Nam, as well as State Council
reports on last year's final accounting of revenue and expenditures and the use
of the central budget for 2003.
