Legislation on personal bankruptcy should be on agenda

In his report on the efforts of people’s courts on enforcement difficulties since 2016, before the National People’s Congress (NPC) Standing Committee on 24 October 2018, Zhou Qiang, the Chief Justice and President of the Supreme People’s Court (SPC), suggested four measures, including “pushing forward establishment of a personal bankruptcy system and improving current bankruptcy law in force”.

The existing bankruptcy system covers the bankruptcy of enterprises as legal persons, but not bankruptcy of natural persons. When the Enterprise Bankruptcy Law was enacted, the legislature believed it was too early to legislate on personal bankruptcy. The suggestion of the SPC of legislation on personal bankruptcy before the national legislature suits current social and economic conditions and the supporting legal system conditions of China for the following reasons.

Current economic development of China necessitates legislation on personal bankruptcy. Household leverage rose rapidly after the Enterprise Bankruptcy Law was adopted. In 2017, the ratio between household debt and GDP was 48.98%, while the ratio between household debt and disposable income of residents was 112.21%. The latter is used to evaluate the debt repayment capability of residents.

Wu Jiejiang is a partner at Jingtian & Gongcheng