From VOICE OF AMERICA:

After 10 years of debate, China is close to enacting a bankruptcy law, a measure intended to raise investor confidence. But it could also be the long-awaited key to unlocking the debt problem burdening China’s banks. The National People’s Congress is expected to take up the bill at its session beginning this week.

China’s current bankruptcy system reflects its old communist command economy in which the government chose which state-owned enterprises would flourish or die.

But China is now increasingly a market economy, driven by private investment. Without an effective bankruptcy law, it is uncertain whether investors can get their money back if a company goes bust. And Chinese banks remain trapped in a cycle of lending to inefficient state-owned enterprises – despite already shouldering billions of dollars of unpaid loans.That is about to change. The annual session of the National People’s Congress this month is expected to pass a new law updating the bankruptcy system.