China and the U.S. are worlds apart in many ways. But in an alternate universe of failed stars orbiting around a planet called bankruptcy court, they have come much closer.
Such is the big bang effect of the country’s first national bankruptcy law, which took effect June 1. The new law gives China a version of America’s Chapter 11, a legal process that allows insolvent companies to stay in business under court supervision while attempting to reorganize and pay creditors.
The new law also entitles foreign owners and creditors for the first time in modern Chinese history to assert rights to assets they own in China. It also provides a legal framework for foreign investors to pursue claims in an orderly fashion when businesses fail, long a missing jigsaw piece in the three decades since China opened itself up to foreign investment.