INTRODUCTION

China, as the largest emerging market of the world after 30 years of opening-up and reform process, has become involved into the economic community quickly and deeply. With unceasing foreign direct investment (FDI[1]) and a gradual increase of out-bound investment in the economic[2] and banking sector,[3] cross-border crisis resolution is a very important issue for the court and regulatory authorities. Below I will explain that the Enterprise Bankruptcy Law of 2007 stipulated basic principles of cross-border insolvency issues in China. To develop provisions of this act, the Supreme Court issued a number of judicial interpretations of the Enterprise Bankruptcy Law, which laid down detailed explanations on a number of issues and facilitated judicial and administration practices. Besides adopting judicial interpretations, other measures aimed at creating a consistent system of institutional bankruptcy law were realized. I will set out that China effectively and rapidly has been covering the legislative loopholes to synchronize relevant laws and increase legal certainty. Apart from that, a step in the banking supervision development has been made, especially at the local level.

OVERVIEW OF CHINESE BANKRUPTCY LAW

China has undergone a prolonged process to develop its bankruptcy law. There was no bankruptcy legislation in China until 1906 when the Ministry of Commerce of the Qing Dynasty enacted the first ever Chinese Bankruptcy Code as part of its legislative modernizing plan. In 1935 another Bankruptcy Law was enacted by the Nationalist government, which remains the main piece of bankruptcy legislation in Taiwan.[4] Nevertheless, in 1949, when the People’s Republic of China was established, the new government abolished all legislation enacted by the nationalist government and set up a completely new legal regime that mirrored the Soviet Union’s model for serving a planned economy. Since bankruptcy legislation is unnecessary in a planned economy, there was almost no bankruptcy law in China from 1949 to 1986.[5]

During the reforming process to a market oriented economy, it was crucial to find a way to make State-Owned Enterprises (SOEs) operate more efficiently. On January 31, 1986, the State Council approved the draft enterprise bankruptcy law, which was later challenged by the representatives of the Standing Committee of the NPC mainly on two points: (i) it was unfair to make managers and workers of an unprofitable SOE bear the result of bankruptcy for which they could not be blamed because the management of the SOE was significantly influenced by the government and other unreasonable factors;[6] and (ii) the accompanying legislation had not been enacted such as company law and labour law and there was no developed social welfare system.[7] Despite strong disagreement from the NPC, the State Council stayed firm in its commitment to bankruptcy reform and then Premier made it clear that if the NPC deferred the enactment of the bankruptcy law the State Council would take a leading role instead.[8] As a result, the NPC adopted the Enterprise Bankruptcy Law (for Trial Implementation) (hereinafter: Old Bankruptcy Law) in 1986.

Five years later, the applicable bankruptcy procedures for non-SOEs were set out in articles 199 to 206 Civil Procedure Law (hereinafter: Civil Procedure Law 1991).[9] But the situation was further complicated by the enactments of other regulations, decrees, and the SPC interpretations. For example, in November 1991 the SPC issued the “SPC’s Opinion on Certain Questions relating to Old Bankruptcy Law” (hereinafter: the SPC Opinion 1991)[10] and about ten years later issued the “Provisions on Some Issues concerning the Trial of Enterprise Bankruptcy Cases” (hereinafter: the SPC Rules 2002).[11] The State Council issued the “Notice on the Relevant Issues concerning the Pilot Implementation of Bankruptcy of SOEs in Some Cities” in October 1994 (hereinafter: the Notice 1994)[12] and the “Supplementary Notice on Relevant Issues concerning the Pilot Implementation in Some Cities of the Merger and Bankruptcy of SOEs and the Reemployment of Workers” in March 1997 (hereinafter: the Notice 1997).[13] The distribution ladders set out in the two notices are however inconsistent with the provisions of the Old Bankruptcy Law. Some provinces also issued their own bankruptcy regulations, such as the Guangdong Provincial Regulation on Company Bankruptcy.[14]

In order to consolidate the bankruptcy laws, the NPC started to draft a new comprehensive piece of bankruptcy legislation in 1994. After more than 10 years of discussions and consultations, on August 27, 2006, the Enterprise Bankruptcy Law (hereinafter: the Bankruptcy Law) was adopted and became effective on June 1, 2007, introducing a single comprehensive corporate bankruptcy regime. Unlike some other Asian countries, such as Korea and Indonesia, which were forced to amend the relevant bankruptcy legislation due to the Asian financial crisis in 1997, China has been able to shrug off the pressure from outside and take its own time to develop the Bankruptcy Law.[15]

It is also worth noting that despite all the practical difficulties in implementation, the number of bankruptcy cases in China increased by about 58 folds from 1989 to 2016. In 1989 only 98 bankruptcy cases were heard in the courts and in 2007 the courts accepted 2955 bankruptcy petitions.[16] This number increased to 5665 in the year 2016.

FINANCIAL INSTITUTIONS’ BANKRUPTCY LEGISLATION

It is widely accepted in most jurisdictions that the bankruptcy proceedings of a financial institution, such as a commercial bank, insurance firm or securities company, should be governed by special rules due to its unique business model and the massive potential impact of its bankruptcy. The special rules could be very different from the normal bankruptcy rules or quite similar to the general rules.[17]

Since financial institutions satisfy the requirement of being an enterprise with legal person status, they are also covered by the Bankruptcy Law. However, Article 134 of the Bankruptcy Law authorizes the State Council to make special implementation rules for the bankruptcy proceedings of financial institutions.[18]

Under Chinese law, there are already a number of special regulations which provide specific bankruptcy related rules applicable to the relevant financial institutions. For instance, in accordance with Article 71 Commercial Bank Law,[19] individual depositors are entitled to priority in distributing the bankruptcy estate of a bankrupt commercial bank.

Article 134 of the New Enterprise Bankruptcy Law also provides that if the financial regulatory authority[20] lawfully takes measures such as taking over management of or commissioning the management to a third party of a financial institution whose operations are facing a material risk, it may petition the court to stay any civil action or enforcement procedure in which the financial institution is the defendant or is the person against whom a judgment is being executed. The State Council may formulate implementing measures in accordance with the New Enterprise Bankruptcy Law and other relevant laws with respect to bankruptcy of financial institutions.

China is a country maintaining the “separate operation and separate supervision” system for the regulation of financial institutions. This means that the bankruptcy of financial institutions is subject to the New Enterprise Bankruptcy Law as well as other financial laws and regulations, but the CBRC, CSRC and CIRC supervise the bankruptcy of commercial banks, trust companies, securities firms, fund management companies and insurance companies respectively.

Please note that the financial laws and regulations were promulgated in different times, in particular, some of them were issued far before the promulgation of the New Enterprise Bankruptcy Law. Therefore, the financial laws and regulations must be applied in conformity with to the provisions of the New Enterprise Bankruptcy Law. For example, paragraph 1, Article 71 of the Commercial Banks Law provides that where a commercial bank is unable to repay its debts when due, as approved by the banking regulatory authority under the State Council, the court shall declare such commercial bank bankrupt. However, according to the New Enterprise Bankruptcy Law, the normal criteria of an enterprise being declared bankrupt are that such enterprise must be unable to pay its debts when due, and the enterprise’s assets are not sufficient to repay all of its debts or the enterprise obviously lacks ability to discharge all of its debts.

CASE ANALYSIS REGARDING CROSS-BORDER BANKRUPTCY BEFORE IMPLEMENTATION OF THE NEW BANKRUPTCY LAW

Due to the lack of uniform regulations, before implementation of the New Bankruptcy Law, in various kinds of cross-border bankruptcy cases different courts were split on the recognition and enforcement of judgments and decisions rendered by foreign courts in bankruptcy. Also, as they were influenced by the evidence provided by the parties and other factors, the decisions were not consistent with each other. Starting from several cases, this section will look back on and analyze the recognition of foreign judgments and decisions in bankruptcy by Chinese courts in China.

Hong Kong-China Related Case of Corporate Insolvency — Nanyang Textile Firm

Nanyang Textile Firm was a wholly foreign owned enterprise operated by a Hong Kong company. In 1983, the firm was insolvent and its holding parent company was liquidated by the Hong Kong court. The receiver appointed by the Hong Kong court went to Shenzhen to request takeover of the assets of the firm in Shenzhen. Due to lack of regulations on this issue at that time, there was no legal basis for solving the issues about whether to recognize the liquidation procedure in Hong Kong and allow the receiver appointed by the Hong Kong court to take over the assets in Shenzhen. Under such circumstances, the Shenzhen court allowed the receiver to negotiate with Shenzhen local government. According to the results of the negotiation, the receiver took over the assets of the firm in Shenzhen which would be distributed in accordance with the Hong Kong liquidation procedure. In this case, the then court (and the government) actually adopted the Universalism Doctrine of Bankruptcy or even the extended Universalism Doctrine of Bankruptcy in practice, which not only recognized the receiver appointed by the Hong Kong court but also subjected the assets of the company invested by this Hong Kong company in China to the Hong Kong liquidation procedure.

The case just discussed presents only one approach in an individual case in practice. Lack of relevant regulations on the issues regarding cross-border bankruptcy could be unfavorable for solving cases according to law when similar cases arose, which to a certain extent contributed to the issuance of Bankruptcy Rules for Foreign-related Companies in Shenzhen Special Economic Zone in 1986.[21] Pursuant to Article 5 of the above Rules, bankruptcy declared under foreign bankruptcy laws has no effect on the assets of the bankrupt party in the special economic zone. This explicitly reflects the attitude of refusing to recognize the effect of the foreign bankruptcy procedure to the assets of the debtor in the special economic zone. Pursuant to this article, since the foreign bankruptcy procedure has no effect on the assets of the debtor in the special economic zone, the foreign bankruptcy procedure is not applicable to the distribution of the assets, either.

EU-China Related Case of Corporate Insolvency — E.N. Group Bankruptcy

E.N. Group originated from Nassetti Company, which changed its name in 1997. Nassetti Company was the foreign shareholder of Nanhai Nassetti Sino-foreign Equity Joint Venture E.N. Group was declared bankruptcy by Judgment No. 62673 of the Milan Court in Italy. Thereafter, the Milan court rendered the Order on Sale in Bankruptcy Case of E.N. Group Stock Company and the Order on Transfer of Confiscated Property to transfer all of the assets, rights and the oversea companies, the shares of which were held by E.N. Group, as a whole to the applicant, B&T Company. However, Nassetti had transferred its shares in Nanhai Nassetti Company to Hong Kong Longxuan Company in May, 1999, upon approval from the local foreign trade and economic department. The applicant, B&T Company, deemed that Nassetti Company infringed the right of B&T Company as the legal owner of the overseas shares of the bankrupt party by transferring the shares in Nanhai Nassetti Company to Hong Kong Longxuan Company, which it was not entitled to dispose. Therefore, B&T Company applied to the Foshan Intermediate Court on December 18, 2000, for recognition and enforcement of the following judgment, order and items: 1. No. 62673 Bankruptcy Declaration Judgment rendered by the Milan Court in Italy; 2. the Order on Transfer of Confiscated Property rendered by the civil court and criminal court in Milan, Italy, on September 30, 1999, to order the bankruptcy trustee to deliver the property of the bankruptcy estate of E.N. Group to the purchaser B&T Company; 3. All of the property of E.N. Group including 98% of the shares in Nanhai Nassetti Company shall be delivered to the applicant and shall be at its disposal; 4. To confirm that the applicant B&T Company had 98% of the shares of Nanhai Nassetti Company and restore the applicant’s legal status as shareholder of Nanhai Nassetti Company.

Pursuant to Article 268 Civil Procedure Law at that time, where recognition and enforcement for a judgment from a foreign court, which has come into force, is sought in a Chinese court, the court shall recognize its effectiveness via decision, if the court, after review in accordance with the international treaties concluded or acceded to by China or in accordance with the principle of reciprocity, deems that it is not in violation of the basic principles of Chinese law or the national sovereignty, security, social and public interests. On May 20, 1991, China and Italy signed the Treaty between the People’s Republic of China and the Italian Republic on Civil Legal Assistance, which officially came into force in 1995. Under this treaty, if the civil judgment rendered by the court in one contracting country, after the treaty comes into force, requires recognition and enforcement by the other contracting country, the recognition and enforcement of the civil judgment shall be conducted pursuant to the treaty. The treaty listed six circumstances in detail, under which the civil judgment shall not be recognized and enforced: (1) Pursuant to Article 22 of this treaty, the court rendering the judgment has no jurisdiction; (2) according to the laws of the contracting country where the judgment is rendered, the judgment has not come into force; (3) according to the law of the contracting country where the judgment is rendered, in case of default judgment, the losing party has not been legally summoned or has not been legally represented, while he is not capable of litigation; (4) the requested court of one contracting country, has rendered the effective judgment for the case between the same parties and for the same subject matter or has recognized the effective judgment of the case by a third county; (5) the requested court of one contracting country is hearing the case between the same parties and on the same subject matter, and the hearing has started prior to filing the lawsuit before the court rendering the judgment, the recognition of which is sought; (6) the judgment includes content, undermining the sovereignty, security or public order of the country being requested. In this case, after hearing the case, Foshan Intermediate People’s Court deemed that E.N. Group, which was declared bankrupt, had its company residence in Milan, Italy. As provided in Article 22 of the treaty, if the defendant has residence within the territory of one of the contracting countries, that contracting country is deemed to have jurisdiction over the case. Therefore, the Milan court in Italy had the jurisdiction to hear the case. At the same time, the bankruptcy judgment and the Order on Transfer of Confiscated Property rendered by the Italian court had already come into force, so it did not concern the circumstances regarding refusal of recognition and enforcement provided in the bilateral treaty or violate the basic principles of Chinese law, national sovereignty, security, or social public interests. Therefore, on November 11, 2001, the court ruled to recognize the legal effect of the bankruptcy judgment rendered by the Milan court in Italy and the Order on Transfer of Confiscated Property rendered by the civil court and criminal court in Milan, Italy.

Furthermore, with respect to the request from the applicant to deliver 98% of the shares of Nanhai Nassetti Company held by E.N. Group to the applicant for its free disposal and confirm the request for 98% of the shares of Nanhai Nassetti Company, as the shares had been transferred to a third party and it concerned the interest of the third party, it was unclear whether it could be enforced directly. Therefore, the court did not directly issue the order of enforcement for the judgment from the Italian court recognized by the court’s ruling, but notified the applicant to claim its right by filing a separate lawsuit with the decision in civil matters.

Banking and Financial Institutions Case

Bank of Commerce and Credit International Shenzhen branch

BCCI (Bank of Commerce and Credit International, BCCI) was a multinational enterprise banking group with headquarters based in Luxembourg. It was taken over, closed and declared bankruptcy by relevant authorities of around 60 or 70 countries such as Great Britain, France, Switzerland, and Spain, for large-scale fraud and money laundering for drug cartels. Bank of China Shenzhen Branch, as its biggest creditor in Shenzhen, applied to the Shenzhen Intermediate Court for declaring BCCI bankrupt and launched the proceeding of bankruptcy and debt repayment. Shenzhen Intermediate Court accepted this case in 1992, and froze the property of BCCI Shenzhen Branch in China as applied by its creditors in China. According to Article 5 Shenzhen Rules, bankruptcy declared under foreign bankruptcy laws has no effect on the assets of the bankrupt party in the special economic zone. Therefore, Shenzhen Intermediate Court did not adopt BCCI’s global liquidation proceedings but it appointed a domestic liquidation team in China separately instead, which was in charge of liquidation of the BCCI Shenzhen Branch. BCCI Shenzhen Branch entered the bankruptcy and liquidation proceedings pursuant to Chinese law.

However, it is worth exploring whether the above-mentioned practice of Shenzhen Intermediate Court has any legal basis. From the materials available to the author, there is no material indicating in detail the legal basis for the appointment of a Chinese domestic liquidation team and launch of bankruptcy and liquidation proceeding by the Shenzhen Intermediate Court. As this case was accepted in 1992, according to the then effective law, there was only the Civil Procedure Law of People’s Republic of China of 1991 in the bankruptcy area. Therefore, during the proceeding of this case by the Shenzhen Intermediate Court, there seemed to be no legal basis from relevant domestic laws and regulations for it to appoint domestic liquidation team in China separately and launch the bankruptcy and liquidation proceeding according to Chinese law. According to reports, due to the fact that the Chinese court did not participate in the global liquidation proceeding, the Chinese creditors received only 25% repayment, while creditors in the other countries received 40% repayment of the debt through the efficient cooperation of courts in different countries.[22] However, there were also different media reports, indicating that the Chinese creditors received more than 30% repayment. Through communication with one of the Luxembourg liquidators for BCCI, the author got to know that the global liquidation proceeding of BCCI was basically completed by 2009.

GITIC bankruptcy – first non-banking financial institution case in China

On January 11, 1999, Guangdong International Trust and Investment Corporation (hereinafter referred to as the GITIC), became unable to pay its huge debts and applied to the Guangdong Provincial Higher People’s Court for bankruptcy declaration. On January 16, 1999 Guangdong Provincial Higher People’s Court according to “The PRC Enterprise Bankruptcy Law (Trial Implementation)” Article I (enterprises which, owing to poor operations and management that result in serious losses, are unable to repay debts that are due shall be declared bankrupt in accordance with the provisions of this Law) and Article VIII (the debtor, upon the agreement of its superior departments in charge, may apply for the declaration of insolvency) ruled: specify a liquidation group to take over the liquidation of GITIC.

A total of 320 creditors claimed RMB 38.78 billion (including 167 foreign creditors to file claimed RMB 32.01 billion). Guangdong Provincial Higher People’s Court ultimately confirmed 200 bankruptcy creditors with a total of RMB 20.22 billion in debt. After liquidation and calculation, the liquidation team of GITIC declared the book total assets of GITIC as 20.94 billion. The Guangdong Provincial Higher People’s Court declared the universality principle over GITIC’s property in the US, HK SAR and other foreign countries and finally recovered investments and loans amounting to RMB 229.84 million.

On March 8, 2003, Guangdong Provincial Higher People’s Court in accordance with the Enterprise Bankruptcy Law and article 5 the 38th Supreme People’s Court’s Interpretation finished GITIC’s bankruptcy program.

Summary of These Cases

The above-mentioned cases occurred before implementation of the New Bankruptcy Law, reflecting the split attitudes of Chinese courts at that time towards recognition and enforcement of foreign bankruptcy cases. The basic reason for such different approaches is because there were no uniform regulations on cross-border bankruptcy cases in Chinese legislation at that time, which was likely to lead to different judgments in the practice. Implementation of the new Bankruptcy Law establishes the general regulations on cross-border bankruptcy case and provides that the bankruptcy proceeding has effect on the debtor’s assets outside the territory of the People’s Republic of China. At the same time, the Chinese courts also recognize and enforce the bankruptcy judgments from foreign courts under the conditions of reciprocity, judicial assistance or international conventions.

CASE ANALYSIS REGARDING CROSS-BORDER BANKRUPTCY AFTER IMPLEMENTATION OF THE NEW BANKRUPTCY LAW

After the Bankruptcy Law was issued in 2007, a uniform guideline for practical hearings has been settled. It is stipulated in Article 5 of the Bankruptcy Law[23] that the cross-border insolvency includes the oversea binding force of judgment made by Chinese courts, as well as foreign judgment has been admitted and executed in China. The following cases are from Chinese courts in the years following the coming into force of the new Bankruptcy Law.

Hong Kong-China Related Case of Corporate Insolvency — Baoyuan (Hong Kong) Co. Ltd.

Dongguan Baoyuan Ltd. (hereinafter: Dongguan Baoyuan), based in Guangdong province, is a machine manufacture company established under Chinese law. It has as only shareholder Baoyuan (Hong Kong) Co. Ltd. (hereinafter: Hong Kong Baoyuan). In 2005, Dongguan Baoyuan increased the registered capital up to HKD 166.6 million while the contributed capital amount was HKD 127.5 million. Hong Kong Baoyuan had a HKD 39.1 million gap as unpaid capital.

The Hong Kong High Court issued a Compulsory Liquidation Order to Hong Kong Baoyuan on April 30, 2008 and received the creditors’ certification from Dongguan Baoyuan, which declared the lawful credit. According to the Law of Hong Kong, once the creditor has declared to the court, it cannot claim or file a suit on the debt against the insolvent party. The only feasible way for the creditor is to declare to the bankruptcy administrator. Since Hong Kong Baoyuan hadn’t paid the contribution to Dongguan Baoyuan, it considered that Dongguan Baoyuan should advocate this debt to the bankruptcy administrator instead of itself.

In 2009, Dongguan Baoyuan filed a suit against Hong Kong Baoyuan in the Dongguan Intermediate People’s Court, for requiring it to undertake the responsibility of contributing the unpaid capital, the amount of HKD 39.1 million. The intermediate court held that Hong Kong Baoyuan had to make a payment to the creditor at the claimed amount. However, in the final ruling made by the Guangdong Higher People’s Court, the foregoing judgment had been revoked and the claimed responsibility set free. The higher court only confirmed the nature of the debt without further payment.

In the court verdict, the higher court complied with the Compulsory Liquidation Order issued by Hong Kong High Court, under Bankruptcy Law and legal assistant treaties. After the declaration to the Hong Kong High Court, Dongguan Baoyuan gave up the right of pursuing debt, HKD 39.1 million, from Hong Kong Baoyuan. As can be noticed in this case, Chinese courts respect and accept the judgment made by the Hong Kong jurisdiction. It has made big progress on integrating with the practical legal convention of the world, compared to the case before the implementation of new Bankruptcy Law discussed above.

The U.S.–-China Related Case of Corporate Insolvency – Topoints Solar Ltd.

Topoints Solar Ltd. (hereinafter: Topoints) is a solar power generation company established under Chinese Law located in Haining, Zhejiang province. On December 25, 2013, the Haining People’s Court issued a verdict of bankruptcy and restructuring of Topoints. As a cross-border company, Topoints and its affiliated company had assets at the value of USD 20 million in Jersey, NY, the U.S. In order to dispose these assets in a more effective way, the bankruptcy administrator applied bankruptcy remedy to the Jersey Bankruptcy Court. In accordance with the U.S. law,[24] if one bankruptcy procedure is considered as the foreign main proceedings, the U.S. court can issue judgment of granting an additional method of remedy and assistance, including that any third party shall not dispose such assets without prior consent by the bankruptcy administrator. The Jersey court regarded the Topoints case a foreign main proceeding and accepted to execute the bankruptcy assist required by the Chinese court.

This is a rare case that the foreign court admits the judgment made by Chinese jurisdiction. It can also be regarded as a successful practice of the Item 1 Article 5 of the new Bankruptcy Law, which provides Chinese cross-border companies great confidence of overseas asset protection.

Sino-US Banking Cross-Border Insolvency Case in 2009 and Regulator’s Coordination

United Commercial Bank (UCB) had 63 U.S. branches and a subsidiary UCB China based in Shanghai (with total asset Scale of RMB 2.68 billion), as well as a HK Branch. UCB’s total assets were USD 11.2 billion and total deposits of approximately USD 7.5 billion. On Friday, November 6, 2009, it was closed by the California Department of Financial Institutions, and the Federal Deposit Insurance Corporation (FDIC) was named Receiver. All deposit accounts have been transferred to East West Bank, Pasadena, CA.

The FDIC continued close cooperation with the Chinese banking regulatory authority (CBRC) regarding regular operations of UCB-China. The CBRC and FDIC signed an Agreement to Enhance Cooperation in Resolving Troubled Cross-Border Financial Institutions in May 26, 2010. Chairman Liu Mingkang of the CBRC and Chairman Sheila C. Bair of the FDIC also signed an Appendix to a Memorandum of Understanding. Under the agreement, the CBRC and FDIC will strengthen cooperation and information-sharing on cross-border crisis management and resolution issues. The agreement will play an important role in maintaining market confidence and ensuring the stability of the banking sector in the two countries.

RECENT DEVELOPMENT IN BANKRUPTCY LAW ENHANCING THE LEGAL CONSTRUCTION OF CROSS-BORDER INSOLVENCY

The Enterprise Bankruptcy Law which came into effect on June 1, 2007 constructed a legal framework on banking institutions’ cross-border insolvency and clearly described the principles of dealing with cross-border insolvency issues in China.

To develop provisions of the law, the Supreme court issued a number of judicial interpretations of the Enterprise Bankruptcy Law.[25]

A Judicial interpretation lays down detailed explanations on a number of issues, including the obligation of a national insolvency administrator to apply for foreign recognition; materials that shall be submitted by foreign representatives on insolvency proceedings application; substantial review procedures; relief measures; disposal of property after recognition of foreign representatives etc.

Besides adopting judicial interpretations, further measures on unification and harmonization of laws were carried out. For instance, due to the time difference in promulgating the Commercial Banks Law, the Enterprise Bankruptcy Law and the Insurance Law, for a long period there was a necessity to build a coherent consistent system of institutional bankruptcy law. Some challenging loopholes, such as an issue whether the reorganization or settlement of a commercial bank shall be approved by CBRC, led to the lack of legal certainty. At present, there are no specific laws or regulations in China that provide special provisions for the bankruptcy proceedings of financial institutions.

Notably, the Insurance Law as adopted in 1995 and revised in 2002 has similar provisions to CBRC regulations. However, after promulgation of the New Enterprise Bankruptcy Law, the Insurance Law was further revised in 2009, 2014 and 2015.[26] The provision similar to Article 71 of the Commercial Banks Law as well as other provisions regarding bankruptcy of insurance companies were added and amended in accordance with the New Enterprise Bankruptcy Law. Therefore, the Commercial Banks Law, the New Bankruptcy Law and the Insurance Law were further amended to be synchronized with each other. A comparable harmonization process was undertaken in respect of trust companies, securities firms, securities investment funds law and insurance companies.

Moreover, a step in banking supervision was made. Notably, in recent years a large scope of local regulations for banking supervision has been implemented. Considering the example of Shanghai, a number of local laws have been introduced, including: innovative banking supervision Pilot Free Trade Zone (hereinafter: SHFTZ) in Shanghai,[27] a focus on risk management process and risk self-assessment of institutions’ operations in SHFTZ, relatively independent banking statistical and monitoring systems for SHFTZ and new regulatory requirements for institutions within SHFTZ.

CONCLUSION