Economic Analysis Of China's Insolvency Law

In a long period, the original China's insolvency law (1986) was established for company's bankruptcy caused by the economic system changing from planed economy to marketing economy. With the development of society, the market request new demand on the China's insolvency law. When the marketing economy grows up, it brings interests and efficiency. The past law can not fit the new market. Now the acting China's insolvency law is a great achievement in our history, it is a completely new insolvency law under the new economic system. Fair and efficiency are the two outstanding of the new insolvency law. What the bankruptcy regulated is a unique stage of company. The economic analysis of bankruptcy is focus on the procedure's design of bankruptcy. Its purposes are to reduce cost and improve efficiency. Pursue the goal of insolvency law should be in a fair and just achieve maximum efficiency, under the premise that the biggest incentive and implementation of compensation, the protection of creditors, while protecting the enterprise. From the perspective of property rights, insolvency law does not create new rights, all stakeholders of the company's property to enjoy the right to claim, but the contents of the claim depends on the implementation status of the company's capital structure. Countries according to the demand of the development of economy to reform the insolvency law in different period and environment. There are two factors which affect China's insolvency law, one is human beings, and the other is market. The human's effect shows surround the implementation of insolvency law on the main components of the justice system. Market factors, as well as deal with the impact of bankruptcy around the bankruptcy-related benefits in kind of person the capital market incentives and human capital markets. The economic goal of bankruptcy is to create incentives to conserve resources to maximize efficiency, optimize the allocation of resources. Its procedure is designed to encourage people to rebuild the structure of capital, to maximize the benefit of a single person or society. The efficiency in insolvency law is actually a kind of balance. This balance means all the related parts share the risk. By this way, the bankruptcy could reduce the cost of bankruptcy and achieve the highest benefits. In the view of economy, bankruptcy is a change of contract. And the insolvency law is established to make sure this change of contract is a balance between the single and society. The cost of new rule is much lesser than a private negotiating or the Prisoner's Dilemma. The efficiency of insolvency law relies on the health and complete marketing system. There is a clear item of reconciliation in China's insolvency law, but no reform item. China's insolvency law had a late start, and the edition 1986 was established for firm owned by country. Until April 1991, all the forms of company were regulated by this law. And the latest insolvency law was act in 2004. In reality, the bankruptcy of the firm which invested by multi-owner is more complex than the firm owned by county. The problems of it are unclear status, unfair benefits and so on. In the law system, the two kinds of company above were not treated in one way. Insolvency law as an extra supervision is an essential parts of social marketing economy. Establish a modern bankruptcy system is requested by the development of Chinese society. According to the experience of developed countries, analysis the insolvency law under the economic view is good for law system and economic system building. In the developed countries, market is the basic of the bankruptcy of company. So in China, we should speed the building of marketing system and law system, watering the land of insolvency law, broaden the range regulated by insolvency law; we also need to identify the capital of country owned company, provide the system of bankruptcy manager, clear the procedure of bankruptcy and punish the crime in bankruptcy. Market leading should be a principle of China's insolvency law, and this law must fit China's need and reflect Chinese character. In one word, whether the social system or the insolvency law itself have to develop base on market.