Legislating for a market economy in China

China Quarterly

Volumn , Issue 191, 2007, Pages 567-585

  Clarke, Donald C ^a  

^a NONE

Author keywords

[No Author keywords available]

Indexed keywords

BOTTOM-UP APPROACH; ECONOMIC REFORM; LEGISLATION; MARKET SYSTEM; STRUCTURAL ADJUSTMENT; TRANSITIONAL ECONOMY;

ASIA; CHINA; EURASIA; FAR EAST;

EID: 37749042746     PISSN: 03057410     EISSN: 14682648     Source Type: Journal    
DOI: 10.1017/S0305741007001579     Document Type: Article

References (52)

1. These models are based on Cooter's models of political modernization and market modernization. The former term does not mean modernization of the political system. See Robert D. Cooter, "Market modernization of law: economic development through decentralized law," in Jagdeep S. Bhandari and Alan O. Sykes (eds.), Economic Dimensions in International Law: Comparative and Empirical Perspectives (Cambridge: Cambridge University Press, 1997), pp. 275-316.
2. See William E. Kovacic, "Institutional foundations for economic legal reform in transition economies: The case of competition policy and antitrust enforcement," Chicago-Kent Law Review, Vol. 77, No. 1 (2001), p. 265.
3. A great deal of controversy was caused by the 2007 Property Law's giving of equal status to public and private property.
4. Barbara Krug and Hans Hendrischke, "Entrepreneurship in China: institutions, organisational identity and survival. Empirical results from two provinces," Erasmus Research Institute of Management Report Series, Reference No. ERS-2002-14-ORG (January 2002), available on http://ssrn.com/abstract=370955.
5. Although the original Partnership Law was not unambiguously clear on this point, the consensus of subsequent practice was that partners had to be natural persons. See Zhu Shaoping, "Tan hehuo qiye fa xiugai" ("A discussion of the revision of the Partnership Law"), Zhongguo renda wang (China National People's Congress Net, 26 April 2006, available on http://www.npc.gov.cn/zgrdw/common/ zw.jsp?label=WXZLK&id=348775&pdmc=1131
6. see also Wang Xiang, "Hehuo qiye fa xiugai qingkuang jieshao" ("An introduction to the circumstances of the revision of the Partnership Law"), Zhongguo renda wang (China National People's Congress Net) 29 August 2006, available on http://www.npc.gov.cn/cwh/common/zw.jsp?label=WXZLK&id= 352015&pdmc=hyjc?=undefined.
7. State Council, "Guanyu geren duzi qiye he hehuo qiye zhengshou suodeshui wenti de tongzhi" ("Notice on the question of levying income tax on sole proprietorship enterprises and partnership enterprises"), 20 June 2000, available on http://www.law-lib.com/law/law_view.asp?id=72144. In the United States and many other jurisdictions, partnership income is taxed once, directly to the partners, and not also at the partnership level. In the United States and China, corporate income is generally taxed once when received by the corporation and again when it is distributed to shareholders as a dividend.
8. Zhu Shaoping, "Revision of the Partnership Law."
9. A limited partnership consists of general partners (although there is usually only one) and limited partners. The general partner exercises management power and bears unlimited liability for partnership obligations; the limited partners are passive investors similar to corporate stockholders who are not liable for partnership obligations. A limited liability partnership is internally like an ordinary partnership, but the partners are not liable for the debts of the partnership.
10. Wang Xiang, "Circumstances of the revision of the partnership law."
11. See Organization for Economic Co-operation and Development, OECD Ecanomic Surveys: China, Vol. 2005, No. 13 (Paris: OECD Publishing, 2005), p. 85.
12. See Gong Xiantian, "Yibu weibei xianfa de 'wuquan fa (caoan)': Wei 'xianfa' di 12 tiao he 86 nian 'minfa tongze' di 73 tiao de feichu xie de gongkai xin" ("A draft Property Law that violates the Constitution: open letter written upon the abolition of Article 12 of the Constitution and Article 73 of the 1986 General Principles of Civil Law"), 12 August 2005, available on http://www.chinaelections.org/ NewsInfo.asp?NewsID=45986.
13. Joseph Kahn, "China approves property law, strengthening its middle class," New York Times, 16 March 2007, available on http://www.nytimes.com.
14. Mure Dickie, "China calls to restrict foreign takeovers," Financial Times, 3 August 2006, available on http://www.ft.com. The objections have been phrased in terms of preventing foreign control of strategic industrial sectors and use the language of national security. Ironically, however, the particular case that was a focus of controversy involved a proposed acquisition by Carlyle, an American firm, of Xugong, a Chinese manufacturer of construction equipment - hardly a sector many would view as strategically critical.
15. Geoff Dyer, Sundeep Tucker, and Tom Mitchell, "Foreign deals in China hit new resistance," Financial Times, 7 August 2006, available on http://www.ft.com.
16. Mure Dickie and Sundeep Tucker, "Beijing seeks to clarify foreign takeover rules," Financial Times, 11 August 2006, available on http://www.ft.com
17. Li Xiran, "New rule curbs mergers by foreign firms," Shanghai Daily 10 August 2006, available on http://www.shanghaidaily.com/art/2006/08/10/288748/ New_rule_curbs_mergers_by_foreign_firms.htm
18. Guo Qiong, Hu Wang, He Huafeng and Ning Yu, "Waizi bingguo xin gui chongjibo" ("The shock wave of the new rules on acquisitions by foreign investors"), Caijing zazhi (Finance and Economy), No. 16 (7 Augusf 2006), pp. 80-82.
19. The literature is too vast to be fully cited here. See, among others, Max Rheinstein (ed.), Max Weber on Law in Economy and Society (Cambridge, MA: Harvard University Press, 1954),
20. and Douglass C. North, Institutions, Institutional Change and Economic Performance (New York: Cambridge University Press, 1990).
21. For good reviews of the literature and the evidence, see Kevin E. Davis and Michael J. Trebilcock, "Legal reforms and development," Third World Quarterly, Vol. 22, No. 1 (2001), pp. 21-36
22. Tom Ginsburg, "Does law matter for economic development? Evidence from East Asia," Law and Society Review, Vol. 34, No. 3 (2000), pp. 829-56
23. and Richard E. Messick, "Judicial reform and economic development: A survey of the issues," The World Bank Research Observer, Vol. 14, No. 1 (1999), pp. 117-36.
24. See, for example, Table 1 in Hiroshi Matsuo, "The rule of law and economic development: A cause or a result?" 2003, available on http://cale.nomolog.nagoya-u.ac.jp/en/files/matsuo/en.
25. Consider also the cases of Japan, South Korea and Taiwan; see Curtis J. Milhaupt, "Law, judicial systems, and economic growth: Notes on the uneasy case of Japan," 2000, available on http://www.worldbank.org/wdr/2001/wkshppapers/summer/milhaupt.pdf
26. John K. Ohnesorge, "Developing development theory: Law & development orthodoxies and northeast Asian experience," University of Wisconsin Law School Legal Studies Research Paper Series, Paper No. 1024 (2006), available on http://ssm.com/abstract=916781.
27. See, for example, John McMillan and Christopher Woodruff, "Dispute prevention without courts in Vietnam," Journal of Law, Economics, and Organization, Vol. 15, No. 3 (1999), p. 637.
28. John McMillan and Christopher Woodruff, "The central role of entrepreneurs in transition economies," Journal of Economic Perspectives, Vol. 16, No. 3 (2002), pp. 153-70.
29. Zhang Xiaobo, "Asymmetric property rights in China's economic growth," DSGD Discussion Paper No. 28 (Washington, DC: International Food Policy Research Institute, 2006), available on http://ssrn.com/abstract-882446
30. Matthew Stephenson, "'Economic development and the quality of legal institutions," The World Bank Online, 2001, available on www1.worldbank.org/publicsector/legal/institutional.htm;
31. Mancur Olsen, The Rise and Decline of Nations: Economic Growth, Stagflation, and Social Rigidities (New Haven: Yale University Press, 1982).
32. Lewis S. Davis, "Institutional flexibility and economic growth," 5 December 2005, available on http://ssrn.com/abstract=871759.
33. OECD Economic Surveys: China, pp. 90 ff.
34. At the exchange rate prevailing during the 12 years the provision was in effect, 10 million yuan amounted to about $1.28 million. During this period, the minimum capitalization required for companies of this kind in the OECD countries was far less: About $42,000 in Germany, and in Delaware, of course, nothing at all. About one-third of ECD countries have to minimum capitalization requirements. Ibid. p. 91.
35. Jonathan R. Macey and Luca Enriques, "Creditors versus capital formation: The case against the European legal capital rules," Cornell Law Review, Vol. 86, No. 6 (2001).
36. Paul H. Rubin, "Growing a legal system in the post-communist economies," Cornell International Law Journal, Vol. 27, No. 1 (1994), p. 4. I am grateful to an anonymous reader for pointing out that property and tort law, properly designed, can spur activities that enlarge the social pie. The innovation encouraged by protection for intellectual property is one example.
37. On the potential for helpful government action in credit reporting, for example, see Messick, "Judicial reform and economic development," p. 21, and the sources cited therein.
38. Benjamin Liebman, "Innovation through intimidation: An empirical account of defamation litigation in China," Harvard International Law Journal, Vol. 47, No. 1 (2006), p. 69.
39. See "'Zhongguo boke di yi an': Fu jiaoshou xiang wangluo manma xuanzhan" ("First Chinese blog case: Assistant professor declares war on web vituperation"), Xinhuanet, 2 February 2006, available on http://news.xinhuanet.com/legal/2006-02/10/ content_4161160.htm
40. "Professor wins suit against blog site," Associated Press, 4 August 2006, available on http://www.breitbart.com/news/2006/08/04/D8J9JK602.html
41. Donald C. Clarke, "Journalism professor wins defamation suit against blog host," Chinese Law Prof Blog, 10 November 2006, available on http://tinyurl.com/tc65s.
42. The case in question pitted the Guangzhou Huaqiao Real Estate Development Company against the journal China Reform. Excerpts from the text of the judgement as well as commentary by prominent attorney Pu Zhiqiang, who appeared for the defendants, can be found at http://www.epochtimes.com/gb/4/10/18/n694419.htm. For further sources, see Liebman, "Innovation through intimidation," appendix B, case 185.
43. Kovacic, "Foundations for economic legal reform."
44. See American Bar Association (ABA) Sections of Antitrust Law and International Law and Practice, "Joint submission on the proposed anti-monopoly law of the People's Republic of China," 15 July 2003, available on http://www.abanet.org/intlaw/committees/business_regulation/ antitrust/abaprcatfinalcombo.pdf;
45. see also ABA Sections of Antitrust Law, Intellectual Property Law and International Law, "Joint submission on the proposed anti-monopoly law of the People's Republic of China," 15 May 2005, available on http://www.abanet.org/intlaw/committees/business_regulation/antitrust/ chinacommentsantimonopoly.pdf.
46. In 1994 and 1997, the State Council issued two Notices, the collective effect of which was to override certain priorities and rights provided in the Bankruptcy Law and the Security Law. Although formally subordinate to NPC legislation, State Council directives will in practice override it in case of conflict. For a discussion of these issues, see Donald C. Clarke, "State council notice nullifies statutory rights of creditors," East Asian Executive Reports, Vol. 19, No. 1 (15 April 1997), pp. 9-15.
47. Sebastian Heilmann, "The Chinese stock market: Pitfalls of a policy-driven market," China Analysis, No. 15 (2002), available on http://www.chinapolitik.de/studien/chin_analysis/ no_15.pdf.
48. Henry Hansmann and Reinier Kraakman, "The essential role of organizational law," Yale Law Journal, Vol. 110, No. 3 (2000), pp. 387-440.
49. William Alford, "The more law, the more...? Measuring legal reform in the People's Republic of China," in Nicholas C. Hope, Dennis Tao Yang and Mu Yang Li (eds.), How Far Across the River? Chinese Policy Reform at the Millennium (Stanford: Stanford University Press, 2003), pp. 122-49.
50. Article 14 of the Civil Procedure Law states that courts may enforce awards made by arbitration bodies established "according to law." Article 10 of the Arbitration Law requires in effect that arbitration bodies be state-certified.
51. Benjamin Liebman, "China's courts: Restricted reform," in this volume.
52. Rubin, "Growing a legal system," p. 2.