China will set up clearing and bankruptcy tribunals at intermediate people's courts throughout the country to better handle "zombie companies" and deepen national supply-side reform measures.

The plan, determined by the Supreme People's Court (SPC) of China, has been handed down to the provincial high people's courts.

All provincial capitals and sub-provincial cities are required to establish at least one clearing and bankruptcy tribunal at local intermediate people's courts.

Intermediate people's courts of other cities and regions may choose to open the clearing and bankruptcy tribunal according to results of a comprehensive evaluation, which must analyze the jurisdiction’s economic and social development and its volume of clearing and bankruptcy cases, among others factors.

The plan also clearly outlines the functions of the clearing and bankruptcy tribunal. Its first duty is to hear cases of compulsory corporate liquidation and bankruptcy. It will also conduct relevant research, give guidance to lower courts, and train and coordinate all involved personnel.

When a clearing or bankruptcy case raises special circumstances, any proposed changes to procedures in the intermediate people's courts must be approved by the local high people's court.

The number of lawyers and assistants for such courts should, in theory, meet the practical demands of the workload.

Judicial staff with the clearing and bankruptcy tribunal of the high people's court should work closely with the local Party committee and government to improve hearing effectiveness, and to promote relevant reforms.