Over the past 12 months, China’s crisis management practices have shifted focus to addressing the structural risks of major enterprises or entire industries. When examining the driving forces behind this transition, it becomes apparent that this shift has been primarily driven by a combination of factors:

• the downturn of specific industrial cycles;
• increasing corporate debt defaults;
• ongoing regulatory adjustments; and
• shifting expectations in the capital markets.

As market perception of debt risks intensifies, the application of pre-packaged reorganisation mechanisms has notably increased, thereby reflecting a trend towards proactive risk management.

Key trends include the proactive management of risks and the deepening integration of institutional tools. As a result of these emerging trends, crisis management practices are evolving from post hoc liquidation to ex ante governance, with greater emphasis on preserving high-quality assets and protecting overall enterprise value. This shift is driving crisis management from isolated, reactive measures towards a systematic governance approach, which in turn imposes higher demands on interdisciplinary expertise and organisational co-ordination.

Using judicial reorganisation cases of China’s listed companies as a benchmark indicator, corporate crises are more prominently observed in sectors such as manufacturing, construction, real estate, photovoltaics and chemicals.

Concerning the primary legal framework, it is important to clarify that the applicable laws in China for handling different types of crises vary. The legal framework for crisis management encompasses not only market-oriented risks such as debt crises and corporate operational crises but also includes natural disasters and public security incidents. Moreover, in addition to the Civil Code, the Company Law, the Securities Law and ancillary regulations within the financial regulatory sphere that are familiar to the market, debt crises also involve the Enterprise Bankruptcy Law, among others.

Regarding recent legislative developments, in 2025 the draft amendment to the Enterprise Bankruptcy Law was submitted for deliberation, marking the first comprehensive revision of this law in 18 years. Key highlights include the introduction of specific provisions for a pre-reorganisation negotiation mechanism and a limited breakthrough in the personal bankruptcy system. These changes are expected to:

• enhance the enforceability of judicial reorganisations and the efficiency of debt relief;
• reduce uncertainties in debt restructuring; and
• bolster the confidence of creditors, investors, employees and the broader market.

Regarding developments in collective redress mechanisms, in 2025 the Supreme People’s Court and the China Securities Regulatory Commission issued new guidance on representative actions for securities disputes, clarifying the special representative action mechanism and stipulating that cases are not required to prepay case acceptance fees (among other opinions), significantly lowering the cost of rights enforcement.

Also in 2025, the revised Provisions on the Causes of Civil Action added new causes of action, including disputes over data and online virtual property, thereby refining the scope of accepting class action lawsuits. The combined effect of these changes is the significant improvement of judicial efficiency in class actions and mass tort litigation.

Regarding the institutional framework for crisis co-ordination, it is important to understand that in China government entities collaborate with a division of labour based on the type of crisis. For instance, in the realm of debt crises and corporate operational risks, local governments assume frontline responsibilities in crisis management, which includes undertaking duties such as risk identification, information reporting, resource co-ordination and maintaining local stability.

Regarding the relationship between local and national regulatory frameworks, it should first be noted that local-level crisis management rules are typically implementing regulations or supporting measures formulated within the framework of national laws. Compared to the unified national system, they place greater emphasis on territorial responsibilities and offer more flexibility in enforcement standards, the pace of resolution, and policy priorities.

Regarding the practical implications for businesses, the primary challenge for companies during a crisis lies in the inconsistency of rules and enforcement standards across different regions. As a consequence, this increases the complexity and difficulty of tasks involved in cross-regional or group-wide risk-resolution efforts.

In China, local-level regulatory authorities play a significant and increasingly prominent role in crisis management and risk resolution. Examining different crisis contexts reveals variation in their roles. In the realm of public crises, local emergency management departments bear territorial responsibilities, acting as the frontline enforcers of the national emergency response system. In the context of debt crises and corporate operational risks, specialised risk-resolution task forces – often led by local financial regulatory bureaus – play a crucial role in stabilising expectations, co-ordinating with creditors and promoting reorganisation plans.

There is no applicable information in this jurisdiction on the existence of independent oversight bodies.

Regarding the crisis response actions of Chinese enterprises, a multi-level mandatory information reporting and transparency mechanism has been established, though its scope and intensity vary depending on the type of crisis.

Specific regulatory requirements for crisis management and risk prevention have been established in key sectors, forming a relatively mature industry-specific governance framework. For instance, in the financial sector, financial regulatory authorities strengthen the preventative control of systemic financial risks through mechanisms such as stress tests, risk monitoring, capital adequacy ratios, and liquidity supervision.

There is no applicable information in this jurisdiction on the existence of pre-established public-private co-operation frameworks.

There is no applicable information in this jurisdiction on the existence of a unified national crisis management plan.

There is no applicable information in this jurisdiction on inter-agency co-ordination mechanisms during crisis situations.

When responding to crises involving multiple jurisdictions, companies co-ordinate their efforts by establishing their own mechanisms, typically through a unified global crisis command and legal co-ordination structure. The operational logic of this approach is that it allows for the co-ordination of strategic decisions at the headquarters level, while local advisers in each jurisdiction are responsible for specific compliance and procedural implementation.

Elaborating on the foundational principle, the core practice lies in maintaining information consistency and strategic synergy across different regulatory regimes. Furthermore, the challenges inherent in this approach, pressures from varying information disclosure standards, data compliance requirements, and the efficiency of cross-border communication create real pressure on the controllability of global crisis management.

Cross-border reporting obligations depend on the specific circumstances. More precisely, companies facing different cross-border crises are typically subject to specific reporting and disclosure obligations, the scope of which is determined by the nature of the crisis and the regulatory fields involved.

Chinese enterprises typically structure their crisis management plans based on the national legal framework and industry regulatory requirements, while also integrating their own business structures, risk exposure points and governance characteristics, and incorporating expert opinions. This process forms an internal institutional system covering prevention, response and recovery.

Turning to the essential elements, an effective crisis management strategy usually includes:

• pre-emptive risk identification and warning mechanisms;
• a clear internal decision-making and authorisation structure;
• cross-departmental co-ordination and external communication arrangements; and
• the design of resolution pathways that align with judicial and regulatory procedures.

Concerning internal governance structures for crisis management, in Chinese companies the leadership, organisation and arrangements for crisis prevention and response are typically conducted through bodies such as the board of directors. In practice, establishing a dedicated crisis committee is not a universal phenomenon. However, if crisis management is viewed as a function rather than a specific body, in large state-owned enterprises, financial institutions or listed companies, governance mechanisms such as the risk management committee or the audit committee play an equivalent or similar role in crisis warning and resolution.

Following the amendment of the Company Law, the personal risks for directors and senior executives during a crisis have significantly increased, as evidenced by the strengthened duties of diligence, loyalty and responsibility for capital maintenance. Balancing this increased exposure, the new Company Law also concurrently provides various scenarios for the exemption or mitigation of liability, such as exoneration based on the business judgement rule, which requires acting in good faith, on an informed basis and with a reasonable belief that the decision is in the best interests of the company.

In China, a crisis committee is not a frequent or standing governance body but is typically triggered by significant risk events or systemic crises. In terms of structural approach, most enterprises establish a temporary task force on a case-by-case basis.

However, it would be incomplete to consider only formal committees, as the same functions concurrently exist and operate in various other forms. For instance, banks, insurance companies and securities firms commonly have a Chief Revenue Officer (CRO) or an equivalent functional position. While large central enterprises and some state-owned companies do not uniformly establish this specific role, the function of the CRO is usually fulfilled through mechanisms such as a Risk Management Committee combined with an executive in charge.

The crisis management team in a Chinese enterprise is typically composed of core decision-makers and heads of key functions, including members of the board of directors and senior executives. The team leader is usually the Chairman, CEO or an executive directly responsible for risk management or the department involved in the crisis.

Regarding meetings frequency and communication patterns, the frequency of communication depends on the stage and urgency of the crisis, which is typically higher in the initial stages, transitioning to periodic assessments, regular reports and specific requests for guidance once the risk is under control.

In China, companies often engage external experts in crisis management and prevention, particularly in complex situations such as debt crises, major disputes or circumstances involving concurrent regulatory and judicial proceedings.

The core criteria for selecting external experts include their professional understanding of the judicial and regulatory systems, their ability to co-ordinate across different legal disciplines, and their proven experience in executing solutions during similar crises. For example, in the debt crisis resolution of a listed company in the real estate sector, external lawyers – together with the company’s shareholders, management and financial advisers – successfully contained the risk of contagion and restored the enterprise’s capacity for sustainable operations through bankruptcy reorganisation proceedings, thereby preventing creditors from suffering extreme adverse consequences.

Concerning third-party risk management, how third-party operations are involved during a crisis depends on various factors. For instance, in the context of bankruptcy reorganisation, third-party and supply chain risks are often managed through a centralised management model led by the administrator. After the administrator legally takes over the debtor’s operations and bankruptcy estate, it uniformly exercises rights related to contract performance and unilateral termination, evaluates key supply contracts, and decides whether to continue performance under court supervision in order to prevent the contagion of risk from individual contracts. Correspondingly, counterparties can also indirectly exercise their contractual rights, audit rights and other evaluation rights through the administrator of the bankrupt enterprise.

Metrics for evaluating the effectiveness of crisis management typically include indicators such as operational (and workforce) continuity, cash flow stability, protection of core assets, the retention rate of key contracts, and the escalation of public opinion.

In terms of continuous improvement, companies often iteratively update their crisis management strategies through post-incident reviews, policy revisions and scenario-based drills. Companies also embed lessons learned from crisis resolution back into their corporate charters, contract templates, or risk control and compliance systems.

Concerning ESG integration, Chinese companies are increasingly incorporating environmental compliance, employee and social impact, workforce welfare, and critical supply chain stability into their risk identification and contingency planning. ESG has become an integral part of preventative crisis management strategies, particularly for companies with overseas operations or listed companies.

Addressing the human rights and labour dimensions of crisis management, ESG requirements are progressively transforming from compliance disclosure topics into substantive binding constraints for crisis management, directly impacting corporate crisis management, response pathways, and the pace of resolution. Examining specific crisis scenarios reveals concrete protections: in many crisis resolution scenarios, employee safety and welfare represent a legally mandated priority for protection. For instance, in bankruptcy proceedings, employee claims are treated as priority claims under the law.

The speed of crisis identification depends heavily on whether the risk has been institutionalised in advance. In practical terms, established companies can typically identify a crisis and its potential legal implications within hours to days.

When facing a crisis, companies usually take three immediate actions:

• freezing key decisions and external communications;
• initiating a rapid fact-finding and legal impact assessment involving legal, financial and compliance functions; and
• establishing a crisis working group led by senior management, seeking support from the government-court co-ordination mechanism when necessary.

Additionally, regarding the use of specialised tools and expertise, a common practice includes engaging external experts, such as instructing external lawyers to provide professional legal opinions when major litigation or regulatory investigations are involved.

While corporate crisis management varies, common principles can be followed:

• risk identification and early-warning mechanisms to quickly assess whether regulatory, litigation or insolvency risks are triggered;
• unifying the response plan through centralised decision-making by senior management and cross-departmental co-ordination; and
• when necessary, leveraging judicial or regulatory procedures (such as reorganisation, compromise or litigation).

Concerning risk identification methodologies, corporate crisis identification can be conducted by evaluating factors such as cash flow, debt structure, case volume and public opinion. Furthermore, establishing collaborative relationships with external professional institutions, including legal and financial advisers, provides multi-dimensional support for complex crises.

Overall, rather than being based on a unified standard, the frequency of corporate simulation exercises is highly correlated with business decisions, specific needs, risk events and regulatory requirements.

Specific training for crisis prevention and response is commonly provided by companies, often led by the legal and human resources departments. Typical employed formats include meetings, courses, expert training or other approaches.

Regarding the existence of formal policies and procedures, Chinese companies typically embed crisis preparedness in their daily governance through systems such as risk management, material event reporting, information disclosure and contingency plans. Regarding implementation mechanisms, these policies are implemented by defining clear trigger conditions, escalation paths and authorisation mechanisms, and are integrated into compliance reviews and internal audits.

Concerning legal challenges, it is important to understand the multi-dimensional nature of crisis-related legal exposure: a corporate crisis can simultaneously trigger liabilities under the Company Law, the Securities Law, the Bankruptcy Law, the Labour Law, environmental regulations or data compliance requirements, leading to intervention by multiple regulatory authorities. The consequence of this multi-dimensional exposure is that it requires companies to co-ordinate their response across different sets of rules and timelines.

Regarding the enforcement landscape and corresponding liability exposures, a tripartite framework can be identified:

• criminal and public security risks primarily originate from public security organs and procuratorates, involving situations such as illegal business operations, duty-related crimes and financial crimes;
• administrative and regulatory responsibilities mainly fall under the purview of industry regulatory authorities, such as the China Securities Regulatory Commission, the National Financial Regulatory Administration and market supervision departments; and
• civil and commercial liabilities are addressed through the People’s Court system, encompassing judicial procedures including contract disputes, tort liability and bankruptcy reorganisation.

During a debt or operational crisis involving a Chinese enterprise, the interaction between the company and enforcement authorities and regulators is continuous throughout the entire resolution process.

Concerning litigation risk assessment methodologies, the assessment of potential legal risks and liabilities is typically conducted based on due diligence and stress tests. By analysing assets and liabilities, equity structure, corporate governance, and industry chain transmission paths, a dynamic qualitative judgement is completed in the early stages of the risk. In terms of key considerations, the focus is on the legality and recoverability of debts, the stability of control, and internal control compliance.

Regarding the timing and manner of legal team involvement, in crisis management within Chinese enterprises, legal teams are typically involved from the moment a risk is triggered. Their involvement is fully embedded in the processes of assessment and decision-making, co-ordinating litigation strategy, restructuring negotiations and regulatory communication, rather than providing isolated legal opinions.

In terms of team structure, companies typically adopt a model with in-house legal counsel leading the effort, supported by external specialists. When selecting external counsel, legal advisers with professional competence, extensive experience and proven practical ability are the common criteria for selection.

In corporate crisis management practice, the collection and preservation of documentation and evidence are regarded as a core component of legal risk control. Companies typically initiate an evidence preservation process during the risk identification phase, where the legal or compliance department systematically organises contracts, financial records, internal decision-making documents and electronic data. Through centralised storage, tiered management and maintaining a complete record of the entire process, these measures ensure that the process is clear, traceable and auditable.

Regarding the range of available consensual resolution mechanisms, in litigation or potential disputes arising from a corporate crisis, the resolution path typically moves beyond purely adversarial litigation to focusing instead on solutions centred around risk control and overall stability.

At the level of debt restructuring, companies often apply for judicial reorganisation to consolidate dispersed litigation and enforcement risks into a unified resolution platform, thereby preventing individual enforcement actions from eroding overall value. Within this framework, and with the co-ordination of the court or regulators, they reach consensual debt restructuring arrangements with core creditors and investors, such as instalment payments, debt-for-equity swaps, asset exchanges or liability reductions.

At the level of litigation and arbitration, companies employ selective defence strategies for key cases or promote exemplary judgments to stabilise expectations and prevent a chain reaction of similar lawsuits.

When administrative or criminal risks are involved, companies mitigate the overall legal consequences through measures such as compliance rectification. These litigation strategies are integrated with restructuring negotiations and the introduction of strategic investors, making legal proceedings an integral part of orderly rebuilding and the restoration of sustainable operations.

Concerning insurance coverage for crisis-related costs, companies often utilise insurance policies such as directors’ and officers’ (D&O) liability insurance, litigation liability insurance, and employer’s liability insurance to cover litigation and related costs. Regarding the claims management process, they follow the basic claims process of reporting, notifying and assessment of loss, which involves promptly notifying the insurance company after an incident occurs and submitting required documentation, such as judgments and claim applications, as requested.

Companies can gauge reputational impact through factors such as:

• shifts in public sentiment;
• stock price and credit rating fluctuations;
• the level of trust from customers and suppliers;
• regulatory attitudes; and
• employee morale.

Regarding post-crisis reputation-rebuilding measures, in the aftermath of a crisis companies work to progressively restore external trust by conveying positive signals through compliance rectification, governance optimisation and operational recovery.

Concerning mandatory reporting obligations, there are multi-level, sector-specific mandatory or regulatory reporting requirements, the scope of which depends on the type of enterprise, industry attributes, and the nature of the risk. For example, the bankruptcy reorganisation of a listed company requires fulfilling information disclosure obligations to the stock exchange, among others.

Regarding communication co-ordination among diverse stakeholders, crisis management is a broad and wide-ranging concept, and there is no unified communication body or channel. However, government co-ordination mechanisms typically involve dedicated departments at the local level. For example, when a listed company facing a debt crisis is at risk of delisting, it may request the local financial regulatory bureau to co-ordinate with regulators such as the China Securities Regulatory Commission and the courts, in order to adopt reorganisation proceedings to resolve the issue. Such activities are generally personally overseen by the company’s legal representative or a core senior executive authorised by them.

Internal communication regarding the crisis is confined to a small, core inner circle, typically including:

• the core decision-making body, such as the company’s board of directors;
• the senior management team; and
• heads of key business units.

These are the primary entities responsible for decision-making and execution.

Effective strategies typically include unifying the information message, responding in a timely manner, and controlling the pacing of releases. Regarding the mechanisms for ensuring consistency and accuracy, companies often establish a single external communication window, where information is collaboratively reviewed by legal, public relations and management teams to ensure that the content is accurate, compliant and consistent.

The primary challenges lie in the intense focus of new media and public sentiment on timeliness and traffic-oriented content, which can generate powerful “supervisory pressure” from public opinion and potentially exacerbate the crisis. Another challenge is the tension between legal risks and public expectations; even a slight imbalance can trigger a secondary crisis.

Communication between the company and its investors and shareholders generally follows the principles of timeliness, symmetry, candour and compliance. Companies typically use their investor relations department or crisis management task force as the information channel to mitigate the disruptive effect of information asymmetry on market judgement. Furthermore, they support investor confidence through substantive measures such as compliance rectification, governance improvement, introducing strategic investors, advancing restructuring and enhancing business operations.

Regarding customer relations during crisis situations, companies typically maintain customer trust through proactive, layered communication mechanisms and verifiable performance actions. In terms of communication channels, companies issue uniform information to the general customer base through official website announcements and social media to ensure message consistency. For core customers, companies employ targeted visits or dedicated contacts to ensure that key information reaches the decision-making level directly.

Companies inform employees through announcements by management or the human resources department, cascading down through department heads at each level to ensure that information is timely and accurate. Simultaneously, by disclosing crisis resolution plans and offering psychological support, they seek employee co-operation, stabilise morale and safeguard operational stability.

Companies may proactively establish dedicated communication channels based on their own risk assessment, or they may be explicitly required to establish specific communication mechanisms due to regulatory or judicial mandates. Employed channels include:

• setting up dedicated hotlines;
• designating specific points of contact;
• conducting centralised communication through creditors’ meetings or court-approved information disclosure platforms during bankruptcy reorganisations or major disputes; and
• issuing authoritative information in a unified manner through official websites and media channels.

Companies utilise tools for monitoring public sentiment to track discussions on social media platforms, enabling them to identify potential risks at the earliest opportunity. Legal and public relations teams collaboratively assess the situation and unify the messaging strategy, which is then reviewed and disseminated through official channels to clarify the facts. In cases of misinformation, they file formal complaints in accordance with the law, request platforms to remove the content, and reserve the right to initiate litigation to prevent the situation from being exacerbated by public opinion.

Companies can leverage AI and big data for monitoring public sentiment, early warning of risk, and sentiment analysis to quantitatively assess crisis impact and support decision-making. They can also use smart models to simulate different resolution strategies. Additionally, blockchain technology can be introduced in evidence preservation, information disclosure and performance record-keeping to ensure that evidence is authentic, tamper-proof and fully traceable throughout the process, thereby enhancing the efficiency and credibility of crisis response.

The primary legal risks associated with using AI for decision-making in crisis management include:

• data compliance risks;
• algorithmic bias risks;
• issues regarding the validity of evidence; and
• erroneous conclusions being drawn from AI hallucinations.

Additionally, some AI models exhibit black box characteristics, making their decision-making logic difficult to interpret. This can pose challenges in adequately justifying decisions during regulatory investigations, litigation or information disclosure. Therefore, in practice, companies typically position AI as a supporting tool and retain human oversight and decision-making to mitigate these related legal risks.

The core objective of post-crisis evaluation for companies is to transition from emergency response to proactive prevention, transforming lessons learned from individual cases into institutionalised capability. The evaluation process is typically led by the legal or compliance department, which systematically analyses the root causes of the crisis by reviewing key decision-making nodes, interviewing relevant personnel and conducting data backtracking.

Participants in the evaluation generally include the core decision-making body, members of the crisis response team, heads of frontline departments, and external advisers, ensuring that the review incorporates both internal perspectives and external professional judgement. The lessons and experiences summarised must be documented through standardised mechanisms, anonymised where necessary, and incorporated into compliance manuals or training materials. These are then disseminated within the company through methods such as specialised seminars and online courses, thereby enabling each crisis to contribute to the systematised capacity of the corporate crisis management framework.

The translation of crisis experience into policies and procedures lies in transforming effective practices into standing written rules. However, revision is not an endpoint; it is essential to embed crisis lessons in daily management through case-based training, updated operational guidance and simulation drills.

Companies assess the effectiveness of their crisis management by examining three key aspects: outcomes, processes and risk control. This involves evaluating whether operations and cash flow have been stabilised, whether risk contagion has been contained, and whether the response was both compliant and efficient.

This evaluation is typically conducted through post-incident reviews, data comparisons and analysis of external feedback. While there is no unified, universal standard for crisis management in China, regulatory rules, industry guidelines and self-regulatory norms constitute important practical benchmarks, particularly for listed companies, financial institutions and centrally administered state-owned enterprises. To stay updated on best practices, companies primarily rely on regulatory policies and enforcement cases, the experience of external professional advisers, case studies of significant risk resolutions by peers, and specialised media reports. They continuously refine their crisis management systems by integrating these insights with their own internal post-incident reviews.