Balancing legal certainty and financial security: the regulatory role of courts in disguised debt in China

Wei, C and Zhao, J ORCID: https://orcid.org/0000-0001-6430-2356, 2025. Balancing legal certainty and financial security: the regulatory role of courts in disguised debt in China. European Business Organization Law Review. ISSN 1566-7529 (Forthcoming)

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Abstract

Disguised debt in China, a type of hidden debt outside financial regulation, presents a challenge for courts balancing certainty with financial security. Current judicial practices often validate disguised debt yet overlook its systemic risks, or reclassify it as equity in insolvency without clear principles. We contend that Chinese courts must assume a flexible regulatory role, dynamically balancing these competing interests. This involves a counter-cyclical approach: during economic booms, courts should adopt a stricter interpretation of financial security and be more inclined to recharacterise disguised debt as equity; during recessions, courts should adopt a more lenient approach, enforcing disguised debt contracts more readily to encourage credit and support economic activity.

Item Type:	Journal article
Publication Title:	European Business Organization Law Review
Creators:	Wei, C. and Zhao, J.
Publisher:	Springer Verlag
Date:	22 September 2025
ISSN:	1566-7529
Identifiers:	Number Type 2507875 Other
Divisions:	Schools > Nottingham Law School
Record created by:	Laura Borcherds
Date Added:	07 Oct 2025 10:24
Last Modified:	07 Oct 2025 10:24
URI:	https://irep.ntu.ac.uk/id/eprint/54509

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