2025 Draft Amendment of the Chinese Enterprise Bankruptcy Law
By Xiahong Chen and Shuai Guo
In September 2025, the National People’ s Congress of the People’ s Republic of China( PRC) released the first draft amendment to the 2006 Chinese Enterprise Bankruptcy Law( EBL), lifting the veil on a long-awaited reform. This marks the fifth bankruptcy statute enacted in China over the past 120 years, and the third since the founding of the PRC. The draft amendment reflects China’ s evolving approach to insolvency governance in the context of economic restructuring, rising corporate distress, and expanding cross-border commercial activity. This article provides an overview of the draft
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amendment and highlights its most significant innovations. Overview The draft amendment significantly expands the scope and sophistication of the EBL. It consists of 16 chapters and 216 articles, compared with 12 chapters and 136 articles in the 2006 law. While retaining the three traditional bankruptcy procedures, i. e. reorganisation, compromise, and liquidation, the draft introduces four new chapters addressing micro, small and medium-sized enterprise( MSME) insolvency, enterprise group insolvency, financial institution insolvency, and cross-border proceedings.
More broadly, the evolution of China’ s bankruptcy law mirrors the country’ s wider social
and economic transformation. Historically, debtors were often treated as moral wrongdoers, and no meaningful culture of debt discharge existed. Over time, however, bankruptcy law has become an institutional vehicle for market exit, corporate rescue, and risk allocation. The draft amendment consolidates this shift toward a more debtor-tolerant, rescue-oriented, and internationally aligned insolvency regime, providing the structural foundation for the more targeted reforms discussed below.
Introduction of quasi-consumer bankruptcy mechanisms
A notable innovation in the draft amendment is the introduction of elements resembling a consumer bankruptcy regime. In Chinese commercial practice, shareholders and company directors frequently provide personal guarantees for corporate debts. Under the 2006 EBL, however, individual debtors had no legal avenue to obtain a discharge, particularly those liable for company-related obligations.
The absence of a nationwide personal bankruptcy regime has also generated persistent enforcement difficulties. Where an insolvent natural person lacks attachable assets, courts often face enforcement problems. In response, the Supreme People’ s Court( SPC) has emerged as a key driver of reform, encouraging experimentation through local pilot programmes in cities such as Shenzhen and Xiamen.
Against this background, the draft amendment introduces a quasi-consumer bankruptcy mechanism by permitting the discharge of debts owed by certain company-related individual debtors within enterprise bankruptcy proceedings. Although concerns remain that personal bankruptcy could be abused to evade debts, this measured and indirect approach
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