China’s top court backs legal action against corrupt firms amid equity rally
South China Morning Post
by Daniel RenFebruary 24, 2026
AI-Generated Deep Dive Summary
China’s Supreme People’s Court has taken a significant step to protect equity investors by supporting legal actions against corrupt firms. The court’s move aims to bolster confidence in the country’s stock markets, which have seen a rally following a 10-day trading break. By encouraging representative lawsuits—where a group of investors can collectively sue companies for wrongdoing—the court is signaling a stronger commitment to holding unscrupulous firms accountable. This initiative is particularly targeted at “special treatment” companies, which are listed or delisted firms that have reported net losses for at least two consecutive years.
The court’s announcement includes plans to issue more guidelines on civil compensation for insider trading and market manipulation, further safeguarding retail investors’ interests. Deputy Chief Judge Wang Chaohui emphasized that courts will take an active stance on representative actions against multiple firms, including those already delisted. This approach is designed to streamline the legal process, allowing investors to recover losses at lower costs while addressing systemic issues in the stock market.
Representative proceedings, also known as class-action lawsuits, enable one or more individuals to represent a group of people with similar interests. These actions are particularly useful for handling claims related to fraudulent earnings reporting or price-rigging practices by powerful funds. By facilitating such legal actions, Chinese courts aim to deter corporate misconduct and restore trust in the equity markets.
The court’s initiative has been welcomed as a positive sign that China’s stock market rally can sustain its upward momentum. Hedge fund manager Zhou Ling described the move as a “positive sign,” suggesting it could encourage more investors to participate in the market with greater confidence in its integrity. This legal framework not only benefits individual investors but also reinforces the broader goal of creating a more transparent and fair financial ecosystem.
Overall, China’s court system is taking concrete steps to address systemic corruption and protect investor rights. By supporting representative actions against corrupt firms, the courts are
Verticals
worldasia
Originally published on South China Morning Post on 2/24/2026