Introduction
On 26 August 2025, the Xiamen Special Economic Zone promulgated the Xiamen Special Economic Zone Regulations on Personal Bankruptcy Protection (the "XiamenRegulations"), set to take effect on 1 November 20251. This landmark legislation marks a significant step in the evolution of China's Bankruptcy framework, becoming only the second such local regulation following Shenzhen's 2021bankruptcylaw. Notably, Xiamen is the first to embed the concept of "protection" directly into the title of its law, signalling a deliberate focus on debtor rehabilitation alongside creditor rights. This article provides analysis of the key provisions of the Xiamen Regulations and offers a comparative perspective with the long-established bankruptcy regime in Hong Kong.
Key features of the Xiamen Regulations
Scope
The Xiamen Regulationsapplyto natural persons. An individual may qualify for relief under the Xiamen Regulations if they have resided or engaged in production or business activities within Xiamen for a continuous period of five years, and are unable to repay due debts while also possessing assets that are insufficient to repay all the debt or clearly in the state of insolvency (Article 2). Such a qualified person may then proceed according to the Xiamen Regulations for restructuring, settlement, or bankruptcy liquidation. The scope is not confined to entrepreneurs or merchants but expressly extends to all qualifying natural persons.
One separate point to note is that this Xiamen Regulations may be only applied in Xiamen. The legal authority for thisXiamen Regulationsis derived from the Legislation Law of the People's Republic of China2. Specifically, Article 84 allows the people's congresses of cities designated as Special Economic Zones ("SEZs"), like Xiamen, to enact regulations within their jurisdictions pursuant to authorisation by the National People's Congress. Furthermore, Article 101 stipulates that where an SEZ regulation provides a derogation from a law or administrative regulation based on such authorisation, the SEZ regulation shall apply within the SEZ. Consequently, the Xiamen Regulations are applicable only within the Xiamen Special Economic Zone, and their legal effect is binding only on the courts within Xiamen.
Mandatory preliminary procedure
A defining feature of the Xiamen Regulations is its mandatory pre-application consultation. Before filing bankruptcy application, a debtor is required to apply for counselling from a designated bankruptcy affairs management institution or a professional organization recognized by it (Article 10). These bodies must then issue consultation report within fifteen days, based on the debtor's detailed financial disclosures, and this crucial service is provided entirely free of charge.
Concurrently, the debtor has the right to initiate an optional pre-application debt reconciliation. They may actively apply to engage in a debt reconciliation process with their creditors, a procedure that is formally launched if more than half of the known creditors provide their consent (Article 13).
Application
Regarding the formal initiation of a case, the Xiamen Regulations enable both debtors and eligible creditors to file a bankruptcy application (Article 19). Eligible creditors refers to those, individually or jointly, holding matured claims against the debtor that exceed five times the per capita disposable income of the city's residents in the previous year. According to data released by the Xiamen Bureau of Statistics3, the per capita disposable income of Xiamen residents in 2024 was RMB 74,249. Five times this amount is calculated as RMB 74,249 × 5 = RMB 371,245, which is not a small figure.
The application isalsosubject to stringent documentation requirements and the debtor must submit a series of extremely detailed materials and are also required to explain the circumstances of individuals for whom they have legally mandated support obligations (Article 20).
Once the Court accepts a bankruptcy application, the debtor immediately becomes subject to a series of strict behavioural restrictions designed to preserve the assets and ensure an orderly process (Article 31). A central pillar of these restrictions is the limitation on high consumption, which explicitly prohibits activities such as flying in first-class cabins, taking business-class seats on high-speed rail, staying at star-rated hotels, and engaging in high-end entertainment expenses (Article 31).
Revoking pre-bankruptcy transactions
The administrator can request the Court to revoke specific transactions made within the two years prior to the bankruptcy application. This includes, for example, the voluntary disposal of property, interest-free loans, and transactions conducted at obviously unreasonable terms (Article 54).
A separate rule applies to preferential repayments to individual creditors. If the debtor was already insolvent within the one year before the bankruptcy acceptance, any repayments that favoured specific creditors over others can be revoked (Article 59).
Discharge
For a debtor undergoing bankruptcy liquidation, the path to a discharge of remaining debts is conditional and involves a defined period of supervision. The process commences from the datethattheCourt rules to terminate the bankruptcy liquidation procedure, at which point a standard three-year supervision period begins (Article 136). Throughout this period, relevant authorities will closely monitor the debtor's property fluctuations, income, and expenditures to assess their good faith and compliance (Article 137).
Upon the expiration of the supervision period, the debtor may apply to the Court for the discharge ofhisremaining debts (Article 142), which means thatexemption of the debtor's remaining unpaid debtsif approved by the Court. However, not all debts of the debtor are dischargeable, for example, debts known to the debtor but not truthfully reported during the bankruptcy proceedings are non-dischargeable (Article 143).
Key differences from Hong Kong's regime
A comparison of the Xiamen Regulations with Hong Kong's established bankruptcy law reveals several key distinctions.
Firstly, a fundamental distinction lies in the accessibility of the proceedings for creditors. In Hong Kong, a creditor may petition for a debtor's bankruptcy if the unsecured debt is a minimum of HKD 10,000. This represents a relatively low and fixed threshold designed to make the remedy widely available. In contrast, the Xiamen Regulations establish a significantly higher barrier. A creditor's application is permissible only if the debt exceeds five times the city's per capita disposable income, which currently amounts to approximately RMB 371,245 (around HKD 400,000) as calculated above.
Secondly, the procedural steps preceding a formal application also differ. The Hong Kong process is initiated by a creditor issuing a statutory demand to the debtor, a formal demand for payment that, if unmet, leads to a bankruptcy petition. The Xiamen Regulations do not prescribe a statutory demand requirement for creditors. Instead, they impose a mandatory consultation on the debtor prior to filing an application, which requires the debtor to seek counselling from a designated institution.
Regarding the administration of the bankruptcy estate, the two regimes utilize different entities. In Hong Kong, the Official Receiver automatically becomes the provisional trustee of the bankrupt's estate upon the making of a bankruptcy order. Upon the making of the bankruptcy order, all the bankrupt's assets are vested in the trustee and will remain so after the bankrupt's discharge from bankruptcy. The Xiamen Regulations do not adopt the concept of a "trustee." Instead, they provide for the Court to appoint an administrator to manage the bankruptcy estate.
Finally, the path to discharge of debts, while similar in duration, follows different procedural tracks. In Hong Kong, a first-time bankrupt who cooperates with the trustee is automatically discharged from bankruptcy after four years. Under the Xiamen Regulations, the standard supervision period following liquidation is three years, after which the debtor will need to apply to the Court for discharge.
Takeaway
The Xiamen Regulations mark a significant advancement in China's personal insolvency framework, introducing a structured process that emphasizes rehabilitation and a fresh start through mandatory consultation and a clear path to debt discharge.
However,uncertaintiessurround the extraterritorial effect of decisions made underthe Xiamen Regulations. As there is no nationwide personal bankruptcy law in China and the Xiamen Regulations are only implemented locally, it remains untested whether a discharge decision and/or other decisionsmade by aXiamenCourt will be recognised and binding onCourts in otherprovinces or cities.
This challenge is not new. Following the introduction of China's first personal bankruptcy framework in Shenzhen, decisions issued by Shenzhen Courts have faced uncertain recognition elsewhere. For instance, after a Shenzhen court discharges a debtor's remaining debts, a Court in a different city might still entertain a lawsuit from a creditor seeking repayment of debt not reported in the previous bankruptcy proceedings, as there is no national legislation stipulates that such a decision is binding on Courts in other cities.
The ultimate effectiveness of this promisingXiamen frameworkin achieving true debtor rehabilitation will depend on its practical execution and the resolution of this jurisdictional question.
Footnotes
1 See the People's Congress of Xiamen, "廈門經濟特區個人破產保護條例", published on 27 August 2025,https://www.xmrd.gov.cn/xwzx/qwfb/202508/t20250827_361860.htm
2 See the State Council of the People's Republic of China, "中華人民共和國立法法", published on 14 March 2023,https://www.gov.cn/xinwen/2023-03/14/content_5746569.htm
3 See Xiamen Bureau of Statistics, "廈門市2024年國民經濟和社會發展統計公報", published on 25 March 2025,https://tjj.xm.gov.cn/tjzl/ndgb/202503/t20250326_2924164.htm?sessionid=
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