The Civil Procedure Code (CPL) and the Enterprise Bankruptcy Law (EBL) cover bondholder rights in the PRC. The CPL applies to all businesses whereas the EBL only applies to state-owned enterprises.

Chapter 19 of the CPL states that where an enterprise suffers losses and is unable to repay debts due, a creditor may apply to the court for a declaration of bankruptcy. In terms of claim priority, the CPL provides that assets used as security-for-debt obligations should be used first to satisfy the respective obligations. If the assets of the insolvent enterprise are insufficient to meet the claim of a single class, distribution is made pro rata within the class.

Under the EBL, insolvency proceedings are initiated by the state-owned enterprise with consent of it's creditors. The insolvent enterprise losses possession and management of properties with its function taken over by a court appointed liquidation committee. All debts become due and payable. The creditor has the right of set-off.

Bond documents may also contain covenants and relevant default clauses specific to the bond issue that provide additional protection to the bondholders.

The Asia-Pacific Restructuring and Insolvency Guide 2006, linked below, provides information on creditor rights in the PRC. The report distinguishes between current bankruptcy legislation and draft of the EBL.