Han Xiao, a lawyer with Beijing Kangda Law Firm, told International Financial News that if a creditor tries to pursue the bankruptcy of its debtor, they need to go through legal procedures, including providing proof relating to the claim and insolvency of the company.

"Asia is now the largest debtor in the world, and several countries are at high risk of debt distress," said Srinivasan, pointing out that Asia's share of global debt has increased from 25 percent before the COVID-19 pandemic to 38 percent now.

China calls on all parties to follow the existing G20 consensus, respect the independent decisions of debtor countries and promote steady progress of relevant work in a practical manner, said Liu.

For example, if more than 10 percent of the amount of money that a debtor owes to a bank is classified into nonperforming assets, all of the money that the debtor owes to the bank should be classified into NPAs.

The ministry pledged to endorse the G20 Action Plan, in response to the requirements of poor debtor countries, and start bilateral talks on the temporary debt repayment suspension.

The suspension of debt repayments should respect and balance the willingness and interests of both creditor and debtor countries, as well as other stakeholders, the statement said.

After the establishment of a personal bankruptcy system, the debtor will be given a chance at a new beginning, which is conductive to the optimal allocation and efficient use of resources.

To get the debt liability exemption, the debtor has to repay part of the debt as a condition and the debtor's economic life will be restricted for about three to five years after the end of bankruptcy proceedings, Xu told a reporter from Beijing Business Today.

Risks could rise unexpectedly, Liu recalled that on one occasion, her bank had lent 20 million yuan to a local businessman who got addicted to gambling and subsequently defaulted, forcing the bank to turn to the guarantor to persuade the debtor to try to revive his failed business and pay up.

To tackle NPLs and get credit risk under control, banks resorted to restructuring of troubled debtor industries, write-offs and transfers.