Large Language Models (LLMs) are increasingly tasked with analyzing legal texts and citing relevant statutes, yet their reliability is often compromised by general pre-training that ingests legal texts without specialized focus, obscuring the true depth of their legal knowledge. This paper introduces CLaw, a novel benchmark specifically engineered to meticulously evaluate LLMs on Chinese legal knowledge and its application in reasoning. CLaw comprises two key components: (1) a comprehensive, fine-grained corpus of all 306 Chinese national statutes, segmented to the subparagraph level and incorporating precise historical revision timesteps for rigorous recall evaluation (64,849 entries), and (2) a challenging set of 254 case-based reasoning instances derived from China Supreme Court curated materials to assess the practical application of legal knowledge. Our empirical evaluation reveals that most contemporary LLMs significantly struggle to faithfully reproduce legal provisions. As accurate retrieval and citation of legal provisions form the basis of legal reasoning, this deficiency critically undermines the reliability of their responses. We contend that achieving trustworthy legal reasoning in LLMs requires a robust synergy of accurate knowledge retrieval—potentially enhanced through supervised fine-tuning (SFT) or retrieval-augmented generation (RAG)—and strong general reasoning capabilities. This work provides an essential benchmark and critical insights for advancing domain-specific LLM reasoning, particularly within the complex legal sphere.