Center

Investors positive about bankruptcy law

By Fei Ya (China Daily)
Updated: 2007-06-28 11:07

Nearly three-quarters of corporate executives expect to increase investment on the Chinese mainland over the next three years after the introduction of a comprehensive bankruptcy law, according to a survey jointly issued by Deloitte China and CPA Australia China Division.

The survey of 480 executives from the mainland, Hong Kong, Singapore and Malaysia found that investors are mainly positive about China's new Enterprise Bankruptcy Law, which was enacted on June 1.

The attitude towards the new law is underpinned by a workable and transparent bankruptcy regime, which will help investors identify investment risks and exit options if investments perform poorly.

Related readings:  New bankruptcy law ushers new phase  Regulation issued on selection of trustees in bankruptcy  Foreign investment grows in support of new enterprises  Foreign investment rises 9.9 percent

The new law unifies the bankruptcy regime for Chinese enterprises on the mainland - including foreign- and domestic-owned, and State- and privately-owned - and is more comprehensive than the former bankruptcy law, which was implemented 20 years ago.

The former law said China had bankruptcy jurisdiction over only State-owned enterprises, but there was nothing in place to protect the more than 4.9 million privately owned companies.

"These reforms address the need for a more efficient and effective redistribution of corporate assets, whether State-owned or privately owned," said Derek Lai, national leader of reorganization services at Deloitte China.

The new law embraces international standard practice and introduces new concepts, such as debt restructuring.

Two-thirds of respondents said a formal debt restructuring system would protect interests of a bankrupt company while half of the respondents believe it would protect the interests of creditors, according to the survey.