Why does China not abolish the minimum capital requirement for limited liability companies?

This article examines why China does not abolish the minimum capital requirement for the limited liability companies (LLCs). By substantially reducing LLCs' minimum initial capitalisation to RMB 30,000, the revised Company Law has largely resolved the problems of discouraging entrepreneurship and wastage of resources. Consequently, the impetus to abolish the minimum capital requirement is weak because China's financial market and legal system are not mature enough for adopting a corporate capital system akin to the common law one, and the requirement is considered necessary for protecting creditors and preventing frivolous incorporation. Copyright © 2009 Sweet & Maxwell.