Beijing's Bankruptcy Laws
China's economy won't steam ahead forever. And when it begins to slow, Beijing will need to weed out failing businesses, fast. From next year, China will have the means of doing so -- in the form of the country's first bankruptcy law with teeth.
To understand the importance of the new law, just look at the one it replaced. Enacted during the early stages of China's economic reforms, that 20-year-old law put the government in charge of every stage of the bankruptcy process. Politics was more important than profitability, with fear of unrest from laid-off workers acting as a deterrent to closing loss making state-owned dinosaurs. Employees' interests ranked above those of creditors. Private companies were not even mentioned in the old law, so a hodge-podge of confusing regulations sprung up to cover them.
The new law, by contrast, applies across the board -- although state-owned enterprises are given a grace period until the end of 2008. Enacted in August by China's legislature, the National People's Congress, it comes into force next June 1. A formal corporate-bankruptcy procedure will be created, with administrators appointed by judges, not the government, as was the case under the old law. Creditors go to the front of the queue for payment, ahead of employees. Creditor committees get a strong role in supervising the bankruptcy process, which means that professionals -- perhaps including foreign lawyers and accountants -- will be running the process, rather than Communist Party officials.
Beijing can also expect its first experience of the Chapter 11-type bankruptcies so common in America. Article 73 of the new law empowers Chinese courts to allow bankrupt companies to continue to run their assets, with a view to reorganizing them into viable businesses instead of going into liquidation.
That doesn't mean the new law is perfect. Loopholes may allow politicians to continue to interfere. For example, while the administrators appointed to run bankrupt companies may be professionals, the Chinese courts that appoint them often are not. Since it is likely to be these courts, rather than the creditors, who determine how much the administrators are paid, that provides the judges -- and their friends in the local government offices -- with further leverage to interfere.
But the new law is still an important step in the right direction, especially in restructuring China's financial system. The sector remains riddled with bad loans to bankrupt companies, which amount to 162% of the country's gross domestic product, according to a recent estimate from the Institute for International Economics in Washington, D.C. This problem needs to be resolved if the banking sector is to cope with the stress of an economic downturn.
Until now, fuzzy bankruptcy procedures discouraged China's four largest state-owned banks -- and their new foreign minority owners -- from liquidating weak companies. Although Chinese banks have acquired majority stakes in many companies through debt-for-equity swaps, few are ready to act as their proprietors. Nor are they ready for the job of judging private-sector credit risks, in many cases still preferring to lend to local government or their cronies in state-owned and privatized firms.
Now, Chinese banks face a steep learning curve. Those that don't learn fast enough may face bankruptcy themselves, since the new law makes specific provision for financial regulators to apply to the court for the liquidation or restructuring of insolvent financial institutions.
Those that do learn could reap rich rewards. The government has been systematically shrinking state-owned banks by removing bad loans from their balance sheets. These institutions could eventually become the nuclei of new banks, which would then be sold to investors able to finance good companies and revive bad ones.
The low recovery rate of China's asset-management companies -- state agencies created in 1999 to manage 1.4 trillion yuan ($176 billion) in bad debts -- gives some idea of how much is at stake. They currently only recover about 20% of the face value of delinquent loans, or 30% for more recent bad loans, thanks to tighter lending policies. The new bankruptcy law could push the recovery rate closer to the global average of 70 cents on the dollar, according to one of its drafters, Professor Li Shuguang of China's Bankruptcy Law and Restructuring Research Center.
If the write-offs of bad loans are accelerated by the new law, China's financial sector will emerge in a much healthier state. In an era when the state of the Chinese economy is assuming ever more global significance, that will be good news not just for Beijing, but for the world economy as a whole.
Ms. Liao is an associate in London with Kirkland & Ellis, an American law firm.
中国新破产法意义重大
中国经济不会永远高歌猛进。当经济增长速度开始放缓时，北京需要及时将经营失败的企业清理掉。从明年开始，中国将具备开展这一工作的手段，具体而言，就是该国第一部“动真格”的破产法将要生效。
要了解这部新法律的重要性，只须看看它取代的那部旧破产法就行了。这项在20多年前中国经济改革之初颁布的法律在各个破产程序中都将政府置于主导地位。由于惧怕因关闭破产国有企业而失业的工人会引发社会动乱，旧破产法在政治方面的考虑要多过对经济因素的关注。这部法律将破产企业员工的利益置于债权人的利益之上。而私营企业在这部法律中甚至根本未被提及，因此私营企业的破产问题多年来一直未有明确的适用法律加以规范。
相比之下，新的破产法适用于所有企业，虽然国有企业在2008年底之前享有一段可暂不执行该法的宽限期。这部由中国最高立法机构全国人大于今年8月正式颁布的法律将于明年6月1日生效。伴随着新破产法的实施，一套正式的企业破产程序将得以确立，届时破产企业的管理人将由法官任命，而不再像旧破产法规定的那样由政府指定。当破产企业进行清偿时，债权人将处于第一受偿顺位，地位优先于企业员工。债权人委员会在监督企业的破产程序方面将发挥重要作用，这意味着破产程序将由专业人士──或许还会包括外国律师和会计师──而不是共产党官员来掌控。
新破产法的实施还使北京首次有机会将破产保护概念引入中国。该法的第73条规定，基于使申请破产企业能够在重组后获得重生，不必走上清偿关门的道路，法院有权批准破产企业在管理人的监督下自行管理财产和营业事务。
但这并不意味着新的破产法已臻完美。该法律的一些漏洞可能会使政界人士得以继续干预企业的破产事务。例如，虽然被任命来掌管破产企业管理人可能是专业人士，但有权任命他们的法官们却往往并非专业人士。由于管理人的收入水平更有可能由法院而非债权人来确定，因此法官们及其在地方政府内的朋友们也就获得了更多干预企业破产事务的便利。
但新破产法仍是朝正确方向迈出的重要一步，特别是就中国金融体系的重组工作而言。中国的金融体系仍然被因企业破产而导致的大量坏帐所困扰。据美国华盛顿的国际经济研究院(Institute for International Economics)最近估计，中国的坏帐总额相当于该国国内生产总值的162%。如果中国银行业要想经受住经济增长低迷期的考验，就必须解决坏帐问题。
迄今为止，企业破产程序含混不清一直使中国四大国有银行──及其外资小股东们──对于让经营不善的企业清算破产一事望而却步。虽然中国的各家银行通过债转股交易获得了许多公司的控股权，但却没有什么银行打算出面直接经营这些企业。这些银行也没有为判断私营企业的信贷风险做好准备，许多情况下它们仍倾向于向地方政府及其支持的国有或私营企业放贷。
但中国银行业目前学习风险管理知识的时间却很紧迫了。那些学得不够快的银行自己也可能会面临破产的窘境，因为新破产法专门为金融监管机构向法院申请对破产金融机构进行重组或清算制定了条款。
而那些切实学到了信贷风险管理经验的银行则会收获颇丰。中国政府一直在有系统地帮助国有银行卸去坏帐负担。这些轻装上阵的金融机构最终将成为银行业的中坚力量，它们上市后将承担起对中国企业扶优济弱的重任。
中国从1999年起已陆续成立了几家专门管理从银行剥离的人民币1.4万亿元(1,760亿美元)坏帐的资产管理公司，从它们的不良贷款回收率之低中可以看出形势是多么严峻。 它们目前回收的资金只相当于不良贷款帐面价值的20%左右，即使拜国家收紧信贷政策之赐，近期所形成不良贷款的回收率也仅有30%。中国破产法与企业重组研究中心(Bankruptcy Law and Restructuring Research Center)的主任李曙光教授是新破产法的起草人之一，他说，这一法律有可能使中国的不良贷款回收率接近70%的全球平均水平。
如果新破产法能加快坏帐的冲销速度，那么中国金融业的健康状况将大为提高。在一个中国经济的全球影响力日益壮大的时代，这不仅对北京来说是个好消息，对整个世界经济也是个福音。
(编者按：本文作者Wen Liao是美国律师事务所Kirkland & Ellis在伦敦的合伙人)
