Hong Kong - China Netting

Due to the lack of specific netting legislation in Mainland China, there is a market perception that a non-defaulting party’s right to terminate transactions and net their termination values (close-out netting) under a derivatives master agreement may be unenforceable when a Mainland China counterparty is subject to bankruptcy proceedings. Consequently, Mainland China has often been dubbed a “non-netting” jurisdiction by many international participants.