The Chinese National People’s Congress yesterday began reviewing a set of major revisions to the 2007 Enterprise Bankruptcy Law. Details on this first major reform effort in nearly 20 years are not publicly available (!), but Xinhua reports that it involves more than 160 new and revised provisions on such topics as post-filing property transfers, optimizing reorg provisions, “and enhancing judicial cooperation in cross-border insolvencies”. This all sounds promising. What’s not mentioned? A long-awaited and much-debated national rollout of personal bankruptcy. Pre-eminent bankruptcy scholar Li Shuguang has characterized the current enterprise-only approach as “only half of a bankruptcy law,” and he had earlier noted that “c]onditions for introducing a personal bankruptcy system are now largely in place, [including] improved institutional frameworks, shifting societal views, and local pilot programmes” in such places as Shenzhen and Wenzhou, among others. Nonetheless, despite a worrying rise in consumer debt and accompanying social tensions, national authorities continue to resist introducing proper treatment protocols for the personal (and small business) side of the bankruptcy hospital.

Another pre-eminent Chinese bankruptcy scholar years ago taught me a proverb that captures this situation perfectly (as 4-character chengyu distillations of Chinese wisdom so often do):  因噎废食 (yin ye fei shi), meaning “not eat for fear of choking.” This phrase encapsulates the danger of being overly conservative about engaging in beneficial behavior due to fear of some possible but unlikely bad outcome. Personal bankruptcy reformers around the world have faced these very fears over and over during the past 30 years (especially but not exclusively in Europe), and the bad outcomes have been muted if not entirely absent. It’s time for China to stop starving its increasingly consumer- and small-business-dependent economy due to fear of bad societal effects of treating natural persons’ insolvency. But for now, it seems China’s overindebted consumers and small entrepreneurs will have to continue to wait.