China’s proposed amendment to the Enterprise Bankruptcy Law of the People’s Republic of China (“2006 EBL”)[1]represents the most significant reform of its insolvency framework since 2006 and marks a pivotal development in its approach to cross-border insolvency. The Draft Amendment to the Enterprise Bankruptcy Law of the People’s Republic of China (“Draft EBL Amendment”)[2] introduces a dedicated chapter on cross-border insolvency, replacing the single, principle-based provision of the 2006 EBL with a more structured statutory framework. Although the Draft EBL Amendment remains subject to further legislative deliberation and potential revision,[3] it provides important insight into the direction, priorities, and institutional design of China’s emerging cross-border insolvency regime.
To situate the Draft EBL Amendment within its broader legal and institutional context, this first article in the series examines the background of the proposed amendment to the Enterprise Bankruptcy Law and the need for an emerging cross-border insolvency framework in China.
A. Reforming the Enterprise Bankruptcy Law
In recent years, the acceleration of China’s economic transformation and the expansion of market participants have intensified the role of market-based exit mechanisms, while heightened economic headwinds, external uncertainties, and the accumulation of corporate debt risks have underscored the importance of an effective insolvency framework capable of both orderly debt resolution and business rescue. Bankruptcy proceedings are therefore being used with increasing frequency to facilitate the orderly resolution of corporate distress. As the number of bankruptcy cases continues to rise, proceedings have also grown more complex, revealing the structural limitations of the 2006 EBL and highlighted the need for systematic legislative reform.[4]
Against this backdrop, revision of the 2006 EBL has gradually acquired sustained and substantive legislative momentum. The amendment was first placed on the legislative agenda of the 13th NPC Standing Committee in 2018, initiating a protracted period of research, drafting, and expert consultation. It was subsequently reaffirmed in the legislative plan of the 14th NPC Standing Committee in 2023, indicating its continued prioritization within China’s medium- and long-term legislative framework.[5] Following multiple rounds of internal drafting and inter-agency coordination, the reform process reached a critical phase in September 2025. On September 8, 2025, the 17th Session of the 14th NPC Standing Committee conducted its first formal review of the Draft EBL Amendment.[6]
The Draft EBL Amendment expands the 2006 EBL into a comprehensive statute of 16 chapters and 216 articles, introducing more than 160 new or revised provisions. It seeks to systematize nearly two decades of judicial practice, respond to changing economic conditions, and align China’s insolvency framework more closely with international standards.
B. Building a Cross-Border Insolvency Regime
Within this broader reform, the introduction of a dedicated framework for cross-border insolvency reflects the increasing internationalization of China’s economy and corporate financing. As the world’s second-largest economy,[7]China remains a significant destination for global capital flows. From the beginning of its reform and opening period through 2023, China attracted nearly USD 3 trillion in cumulative foreign direct investment,[8] and in 2024 alone utilized approximately USD 116.24 billion in foreign investment, maintaining its position as the largest FDI recipient among developing economies.[9] In parallel, China has become deeply integrated into global debt markets. As of 2024, China’s total external debt stood at approximately USD 2.42 trillion.[10] Corporate borrowers account for a substantial portion of this exposure: external debt of China’s non-financial corporate sector was estimated at approximately USD 1 trillion in 2024.[11] These extensive financial linkages mean that the financial distress or insolvency of Chinese enterprises frequently implicates foreign creditors, investors, and courts across multiple jurisdictions.
China Evergrande Group (“Evergrande”) provides a representative illustration. Evergrande is incorporated in the Cayman Islands and listed in Hong Kong, while its headquarters, operations, and the vast majority of its assets are located in mainland China. Notwithstanding this operational concentration, the group relied extensively on offshore financing through U.S. dollar–denominated debt instruments issued by its offshore entities.[12] Following its default on offshore notes in 2021, Evergrande became subject to winding-up proceedings in Hong Kong[13] and pursued parallel restructuring efforts across multiple jurisdictions, including recognition proceedings in the United States under Chapter 15 of the U.S. Bankruptcy Code (“Chapter 15”) , in order to give effect to its offshore restructuring arrangements and address potential enforcement actions by creditors holding New York law–governed debt.[14] Evergrande’s restructuring efforts illustrate the growing practical need for Chinese enterprises to address financial distress through cross-border insolvency mechanisms.
Notwithstanding China’s deep integration into global capital markets, its statutory framework for addressing cross-border insolvency has remained narrow and under-specified. The 2006 EBL addresses cross-border issues only in Article 5, which sets out general conditions for the recognition and enforcement of foreign insolvency judgments and rulings but provides no procedural mechanisms, jurisdictional rules, or guidance for coordinating parallel domestic and foreign insolvency proceedings (“foreign proceedings”).[15] As Chinese enterprises increasingly rely on offshore financing and operate through multinational group structures, this limited statutory treatment has generated uncertainty for foreign creditors and investors, increased enforcement costs, and complicated asset recovery in cross-border restructurings.
Within this context, the Draft EBL Amendment transforms the 2006 EBL’s single, principle-based provision into a more structured statutory framework by clarifying the extraterritorial effects of Chinese proceedings, establishing jurisdictional rules, and setting out standards for the recognition of foreign proceedings.
[1] Qiye Pochan Fa (企业破产法) [Enterprise Bankruptcy Law] (promulgated by the Standing Comm. Nat’l People’s Cong., Aug. 27, 2006, effective June 1, 2007) [hereinafter 2006 EBL], English translation available at https://english.www.gov.cn/services/doingbusiness/202102/24/content_WS6035f009c6d0719374af97ad.html.
[2] Qiye Pochan Fa Xiuding Caoan (企业破产法修订草案) [Draft Amendment to the Enterprise Bankruptcy Law of the People’s Republic of China] (released by the Standing Comm. Nat’l People’s Cong. for public comment, Sept. 12, 2025) [hereinafter Draft EBL Amendment], available at https://www.npc.gov.cn/npc/c30834/.
[3] Lifa Fa (立法法) [Law on Legislation] (promulgated by the Standing Comm. Nat’l People’s Cong., Mar. 15, 2000, effective July 1, 2000), arts. 32–33 (providing that draft laws placed on the agenda of the Standing Committee of the National People’s Congress are generally subject to three rounds of deliberation prior to adoption, although draft laws on which views are relatively unified may be submitted for a vote after two rounds).
[4] Li Xiaojian, Facilitating Market Exit and Revitalizing Enterprises—The Enterprise Bankruptcy Law Undergoing Major Revision, China Nat’l People’s Cong. (Nov. 25, 2025), http://www.npc.gov.cn/npc/c2/c30834/202511/t20251125_449676.html.
[5] Di Shisan Jie Quanguo Renmin Daibiao Dahui Changwu Weiyuanhui Lifa Guihua (第十三届全国人民代表大会常务委员会立法规划) [Legislative Plan for the 13th National People’s Congress Standing Committee] (2018) (listing amendment to the 2006 EBL as a priority legislative project). Di Shisi Jie Quanguo Renmin Daibiao Dahui Changwu Weiyuanhui Lifa Guihua (第十四届全国人民代表大会常务委员会立法规划) [Legislative Plan for the 14th National People’s Congress Standing Committee] (2023) (again listing amendment to the 2006 EBL as a priority legislative project).
[6] Shisi Jie Quanguo Renmin Daibiao Dahui Changwu Weiyuanhui Di Shiqi Ci Huiyi Yicheng (十四届全国人民代表大会常务委员会第十七次会议议程) [Agenda of the 17th Session of the 14th National People’s Congress Standing Committee] (Sept. 2025).
[7] World Bank, GDP (Current US$): China, https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=CN.
[8] Ministry of Commerce of the People’s Republic of China, Statistical Bulletin of Foreign Direct Investment in China 2024, available at https://fdi.mofcom.gov.cn/EN/come-datatongji-con.html?id=16112.
[9] Ministry of Commerce of the People’s Republic of China, Statistical Bulletin of Foreign Direct Investment in China 2025, available at https://wzs.mofcom.gov.cn/ztxx/art/2025/art_e81a35a3508241bf81103fc782c166c3.html.
[10] State Administration of Foreign Exchange (SAFE), China’s External Debt Statistics (2024).
[11] International Monetary Fund. People’s Republic of China: 2024 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for the People’s Republic of China, IMF Staff Country Reports, No. 2024/258 (2024), https://doi.org/10.5089/9798400284281.002.
[12] In re China Evergrande Group, [2024] HKCFI 363, HCCW 220/2022 (Ct. First Instance Jan. 29, 2024) (H.K.) (winding-up order).
[13] In re China Evergrande Group, HCCW 220/2022 (Ct. First Instance filed June 24, 2022) (H.K.) (winding-up petition presented by an offshore creditor following default on offshore notes).
[14] In re China Evergrande Group, Case No. 23-11332 (MEW) (Bankr. S.D.N.Y. Aug. 17, 2023) (motion seeking recognition of foreign insolvency proceedings under Chapter 15 of the U.S. Bankruptcy Code); see also In re China Evergrande Group, Case No. 23-11332 (MEW) (Bankr. S.D.N.Y. Apr. 22, 2024) (order granting motion to withdraw verified petitions and dismiss Chapter 15 cases following the appointment of joint and several liquidators in the Hong Kong winding-up proceedings).
[15] Guanyu Zhonghua Renmin Gongheguo Qiye Pochan Fa Xiuding Caoan de Shuoming (关于中华人民共和国企业破产法修订草案的说明)[Explanation of the Draft Amendment to the Enterprise Bankruptcy Law of the People’s Republic of China], delivered by Zhong Shan, Chair of the Financial and Economic Affairs Committee of the National People’s Congress, at the 17th Session of the Standing Committee of the 14th National People’s Congress (Sept. 8, 2025).