New bankruptcy law in China

Jocelyn Ford Aug 28, 2006
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New bankruptcy law in China

Jocelyn Ford Aug 28, 2006
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MARK AUSTIN THOMAS: China is getting a new bankruptcy law. That law should help move the country closer to a market economy. But don’t expect any cheering from Chinese workers. Over the weekend that nation’s lawmakers approved new rules that were 12 years in the making. Jocelyn Ford has more.


JOCELYN FORD: If you don’t have a good bankruptcy law, you can’t have a healthy banking system.

That’s where China’s at today. Its current law only covers state-run companies, and it gives workers first dibs on any money that’s left over after the business goes under.

Editor of the China Economic Quarterly Arthur Kroeber:

ARTHUR KROEBER:“When companies got into trouble there was immense political pressure to take care of the workers, and the creditors of the bankrupt company came very low down on the list of priorities.”

That meant banks couldn’t price loans properly, because they didn’t know what they could get back.

Under the new law, that will be reversed. Creditors get paid first, workers next. The law also applies to all private companies, and foreign companies, not just state run companies.

It comes into effect next June.

In Beijing, I’m Jocelyn Ford for Marketplace.

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