Edited by Matthias Haentjens and Bob Wessels
The banking system plays a critical role in fuelling the Chinese economy, which has overtaken Japan as being the second largest one in the world and is likely to eventually surpass the United States. How the banking system will be managed over the next few years will have important ramifications not only for China’s future, but for that of the world. In the context of continuing evolution of the Chinese capital market, there are questions about the strength of the banking system, its effectiveness at allocating capital to maximize China’s growth, and the impact of capital allocation on the shape of the economy (including the relative size of the government and private sectors). It is controversial whether the banking system represents a major vulnerability for China’s economic development. However, Chinese banks are certainly not immune to insolvency. In this context, how China will approach the insolvency of its commercial banks will be not only of theoretical interest but of practical significance to the depositors and investors, domestic and foreign, and to China itself and the rest of the world. This chapter provides an overview of China’s banking insolvency issue in the context of its banking system and details the Chinese legal approach to insolvency of commercial banks.
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