Bankruptcy Reform: China a Safer Bet

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Bankruptcy in China often seems more like a melee than a systematic process. That may soon change under China's proposed new bankruptcy law.

The law will incorporate a Chapter 11-like reorganization concept similar to that used in the United States and will modernize China's bankruptcy code to comply with World Trade Organization requirements.

For U.S. banks and other foreign investors involved in or considering opportunities in one of the world's fastest-growing economies, this reform should be a giant step in improving their confidence.

China's current bankruptcy law can charitably be described as incomplete, inconsistent, and opaque. The rules currently do not apply to all entities throughout the country, and they grant creditors …