Rethinking the current reforms of China's micro and small enterprise bankruptcy legal framework: Which way forward?

Abstract The Enterprise Bankruptcy Law of the People's Republic of China (Revised Draft) (hereinafter the Revised Draft) includes, for the first time, a special chapter on micro and small enterprise (hereinafter MSE) bankruptcy. Notwithstanding the long‐overdue legislative response to MSE bankruptcy, this special chapter remains largely unexamined in academic literature. This article critically assesses the special chapter in the context of China's ongoing bankruptcy law revision. Drawing on a systematic analysis of court‐issued bankruptcy white papers, local policy documents and pilot programmes, and typical cases, the article identifies a central paradox: although the special chapter achieves significant progress in statutory recognition, scope delineation and procedural efficiency, it falls short in delivering substantive rescue for distressed MSEs and their owners. The article finds that the special chapter's ambiguous eligibility criteria, the absence of personal debt resolution for MSE owners, and a lack of post‐bankruptcy support stem not from legislative oversight but from deeper structural constraints, including the balancing of competing interests, underdeveloped legal infrastructure and the gradualist pace of legal revision in China. To address these gaps, the article outlines a tailored bankruptcy framework for MSEs in China that broadens eligibility, coordinates enterprise and personal bankruptcy regimes, and establishes post‐bankruptcy relief for both bankrupt business owners and surviving MSEs. By institutionalising these refinements, China would tailor its MSE bankruptcy framework to the practical realities of MSEs, achieving substantive rescue rather than merely procedural efficiency.