Why is Shenzhen adjusting China’s first pilot personal bankruptcy scheme?

The southern Chinese tech hub of Shenzhen plans to introduce a stricter supervisory mechanism for debtors who apply for personal bankruptcy, aiming to address public concerns over “debt evasion”.

Starting in October, a debtor’s bankruptcy information will be publicly disclosed for up to eight years once a court rules that their outstanding debts be discharged, the city’s bankruptcy administration announced last week.

Shenzhen, in Guangdong province, adjoining Hong Kong, became the first city in mainland China to pilot a personal bankruptcy system in March 2021. Just over 500 cases have been processed since then, encompassing debt restructuring, liquidation and reconciliation totalling 193 million yuan (US$26.89 million).

However, no individual has had their debts fully discharged.

Some legal experts argue the pace remains slow relative to the thousands of applications submitted and broader societal demand. They have called for bolder reforms to offer more debtors – especially the owners of small businesses – a genuine second chance to restart their lives as personal and household debts rise in an ongoing economic downturn.

Over 65 per cent of the applicant debtors in the pilot scheme are self-employed individuals, corporate shareholders or entrepreneurs.