(Yicai Global) July 17 -- China will examine ways to establish a bankruptcy mechanism for individuals and improve its related laws for corporations to enhance the manner that the nation handles such credit defaults.

The National Development and Reform Commission as well as 12 ministries and commissions issued a plan to study how to solve liability issues regarding non-performing debts so that consumers and firms can recover more easily from their states of insolvency, the China Securities Journal reported.

China has been seeking better ways to phase out "zombie companies" amid an economic slowdown. The government has encouraged state-owned firms to engage in mixed-ownership reforms, resulting in mergers, including a union of shipbuilders and a marriage between a conglomerate and a silk exporter earlier this month.

The pilot system may be launched in some regions in the second half of this year, people familiar with the matter told the same newspaper. 

China's current credit blacklist for individuals draws from those of other nations, Chen Liqing, head of a Chinese law department at Shanghai's PKF Demei Law Firm, told the same source. A person will be deemed insolvent for two years, with a possible extension of three years due to misbehavior, Chen said. The Supreme People's Court can reverse the order upon successful repayments, he added. 

Editor: Emmi Laine