Research

In prevailing accounts, bankruptcy resolves financial distress through creditor coordination, value preservation, priority compliance, and equitable distribution. This paper argues that China's reorganizations of large, politically salient firms depart from that paradigm in systematic ways. It identifies an emerging framework — "state-in-possession (SIP)" — under which the state assumes effective control over distressed firms through corporate governance restructuring, repurposing bankruptcy from a mechanism of firm-level debt resolution into an instrument of macroeconomic risk management and socio-economic coordination. The argument is developed through two contrasting case studies: HNA's reorganization as a rescue of a national champion, and Evergrande's as a response to systemic risk.

China's local government debt crisis is, at its core, a problem of loss allocation. In the absence of a formal municipal bankruptcy regime, losses are shifted, deferred, and redistributed through administrative coordination — producing soft budget constraints, moral hazard in lending, and accumulating systemic risk. This paper argues that municipal bankruptcy functions as a commitment device: a well-designed regime would specify ex ante who bears losses and in what priority, transforming implicit guarantees into explicit rules. Drawing on Chapter 9 of the U.S. Bankruptcy Code as a structural reference, it proposes a framework for China organized around the functions of triggering formal recognition of fiscal exhaustion, restructuring and, where appropriate, consolidating the LGFV liabilities with municipal debt; and allocating residual losses through a transparent, ex ante waterfall. The goal is not institutional transplantation but a clearer allocation of fiscal responsibility across the central-local hierarchy and state-private divide.

This paper examines how the Chinese state uses bankruptcy not merely to resolve financial distress, but as an instrument of economic governance. Focusing on small- and medium-sized enterprise bankruptcies, it theorizes "reverse industrial policy" — state intervention at the point of firm exit. Unlike conventional industrial policy, which promotes entry and growth, reverse industrial policy operates through the managed contraction of the private sector: eliminating excess capacity, consolidating fragmented industries, and selectively reallocating assets toward politically favored actors. Methodologically, the project combines empirical legal analysis with large language models to construct and analyze linked datasets on firm exit, restructuring transactions, and bankruptcy-related legal texts.