China Law Blog

Dan,

Interesting post.

I’ve thought a little about the issue of China and the Rule of Law, and am undecided.

I totally agree with you that far from there being no law in China, there are numerous laws, that with numerous laws, everyone is in breach in some way or other, and that the authorities will use this as a management tool when the need arises (using the term ‘authorities’ loosely, because this tactic does seem to be part of the mentality of any authority in China).

I also see a slightly different scenario, which is where the rules say one thing, but the ‘authorities’ knowingly allow practices which are not within the rules. This gives an amount of slack which can be taken up at any time, and this taking up of the slack is also used as a management tool. A classic example for foreigners in China was the very sudden tightening of the visa rules for foreigners after the T*b3t crisis and before the Olympics. As a maneuver, it works brilliantly; those affected are very suddenly and very firmly on the back foot, wondering what happened, with no real comeback or bargaining chips.

The interesting issue from a Rule of Law point of view is that in classic conceptions of the Rule of Law, discretion in the application of the law is regarded as undesirable, as it paves the way for arbitrary decisions by those in power. In China, legal concepts such as ‘reasonable expectation’ seem to carry no weight, and though there are rules for everything, there doesn’t seem to be much indication that those who apply the law are moving away from the idea that they are entitled to reserve discretion either by creating a multitude of rules or by deliberately allowing practices outside the rules.

So, at the very least, China seems to be working to its own model of the Rule of Law. Yes, many areas are being rapidly codified, but it is hard to see any change in the practice of reserving discretion in the ways we are discussing, which is a fundamental difference with western conceptions of the Rule of Law.

so how do you typically advise your clients, Dan? Does one have to conform to the cliche of having good connections with the (local) government in order to do business? Have you ever called up officials who you have personal relationships with to get a sense of the direction a government decision may go, just like what Cai Jing magazine sometimes does?

Interesting.

If we look back to 30 years ago, or even 10 years ago, we'll find the great progress in the Rule of Law that has been made in China. In China a famous sentence is often cited which is "there must be laws to go by, the laws must be observed and strictly enforced, and lawbreakers must be prosecuted". I think the first step is you must have law to go by. Otherwise you cannot predict the consequences of your activity and discretionary punishment is unavoidable. Many law scholars wrote a lot of articles about what law is needed and why they are needed. The Rule of Law has been adopted by the government as a basic national policy. That's why there are so many laws were made in China within the recent 10 years.

We have to say that when the law is made so rapidly, the law enforcement department--the government has not kept a pace with that. When the new law is made one by one, the old ones are not sorted out properly and those which are in conflict with the new ones are not repealed timely. This causes confusion not only to lawyers, but also to the government and the court. This point has been raised recently. The other problem is the law is not strictly enforced, which is another reason of the confusion to the law. I think the key point of Rule of Law is the law being enforced strictly. In this point I'd say we are far from Rule of Law, though we're heading for it slowly.

"Rule of law" is one of those terms like "democracy" and "socialism" that means so many different things to different people that it's almost pointless to use it without defining it.

One other problem with "rule of law" is that people often have this idealized notion of "rule of law" that describes nothing that actually exists. Also people attribute things to China that really aren't particularly Chinese. Talking about who Chinese authorities tighten and loosen rules with regard to visa and immigrations as if only Chinese did that seems odd to anyone that has ever had to do with US immigration authorities.

Also concepts like In China, "reasonable expectation" seem to carry no weight because that's a concept in English law that doesn't have anything corresponding in the German legal system on which Chinese law is based.

Hillier: Yes, many areas are being rapidly codified, but it is hard to see any change in the practice of reserving discretion in the ways we are discussing, which is a fundamental difference with western conceptions of the Rule of Law.

I don't think it *is* really a fundamental difference. One problem here is that we are comparing an idealized system with a real system, as opposed to comparing two idealized systems or two real systems. Striking a balance between administrative agencies and the courts is something that is quite tricky.

There are restrictions on the courts in the US with the "political question" doctrine and the "cases and controversies" requirement. Also if you look at things like anti-trust law and banking law, the courts leave huge amounts of deference to administrative agencies. There are concepts in US like such as "Chervon deference" which limit the scope of the courts.

Also, in one important area, Chinese courts are considerably more powerful than US courts. US courts cannot issue advisory opinions whereas the Supreme People's Court routinely issues interpretations which makes it something of a mini-legislature.

I'm really wondering how much experience that American company really has in international business. In any business that I'm aware of, maintaining good "guanxi" with local politicians and the local community is a pretty essential part of doing business, since they can make your life miserable if you don't have it.

If you look at any little league field or marathon in the US, you see tons of corporations giving out sponsorships. Part of it is altruism, but most of it is self-interested community relations since you really want people on the jury and the zoning commission to think good things about you.

I have to say these rules mentioned by WSJ are not laws in China in a strict sense according to the Legislatin Law of PRC. Those bizarre rules usually happen in the western backwards area where local governments acted more like bosses bossing its people around.

China has always had the problem of maintaining its law steady since the economy and society has been chaning "minute by minute". Central and local governments have to respond to those changes by imposing new rules or directives or order if they see any problem rising.

Take the property market for instance, rules have been changed back and forth in line with the rise and fall of the property market. When I represented a foreign client in purchasing properties in Shanghai, my client asked me via sms about the tax issues in the deal, I have to reply that I don't think i can make it clear to you via one or two sms and I have to write an email. Why? because rules regarding taxes have been changed very complex due to the piecemeal legislation approach.

To the question in the second comment.

I'd say it's helpful for your business if you have good connections with the local government, but you do not HAVE TO do that. Actually in order to attract more foreign investments, the local governments in most parts of China would like to help the foreigners to have a good business. This also helps to give the local government a good reputation. The situation is different from some years ago and the philosophy of the government is also different. A good economic environment and investment environment helps get the officials promoted. I am a Qingdao lawyer and my practice is mainly foreign investment in China. My experience is the above.

Maybe pedantic, but I have always assumed that China was developing a system founded on the principles of ‘Rule by Law’ instead of ‘Rule of Law’. Doesn’t rule of law undermine an authoritarian system as it would require those in power to assume that they themselves are not above the law? Furthermore, wouldn’t a judiciary with greater independence than current exists in China be a critical component to developing rule of law?

but guanxi is important anywhere, taking advantage of guanxi does not necessarily mean hurting the rule of law. the thing with China is, as it's struggling to get to the international legal standards, it is not yet ready to abandon all the traditions and hidden rules that the society has been evolving around for hundreds or even thousands of years. laws have been made to satisfy political and moral needs, because the idea of having laws sounds so "right". On top of all that, you see different ministries, departments, and local governments hire people (sometimes very young ones) with uneven abilities, educations, life experiences and understandings of law to legislate. It's no surprise that laws turn out to be not so well thought out or understood even by the legislators.
The good news is, this is part of China's growing pains. At least the public is educated during the process. The rest takes time.

China's population is important to keep in mind as well. The more people you have, the more competition you have between these people; as a result, there's a higher propensity for disagreements between these people to occur.

I think that given China's population and intensive competitive environment, a legal system without a large amount of laws is a bit unavoidable here. People are drawn to use law in order to resolve disagreements in non-violent ways (generally). In China, creating a lot of laws seems to be a natural response to a highly competitive social environment.

Tim: Doesn’t rule of law undermine an authoritarian system as it would require those in power to assume that they themselves are not above the law?

That's a common belief, but I don't think it's true at all. If you look at who some of the major historical advocates of law, they often tend to be monarchs that want to use law to break up local control.

Personally, I think that "rule of law" can strengthen an authoritarian system and has done so in China. One problem without a system without "rule of law" is that people cannot retire. Jiang Zemin cannot hand over power to Hu Jintao because without "rule of law" Hu has no assurance that Jiang won't take it back, and Jiang has no assurance that he won't end up in jail if he resigns. Rule of law allows for peaceful transfers of power, and if you don't have peaceful transfers of power, then the regime tends to crumble when the dictator dies or goes senile.

"Rule of law" is important in keep the leaders from fighting each other. One big reason that I think the CCP has survived while the CPSU has not is that China had a strong system of law to keep internal disputes within the Party from getting out of hand.

Tim: Furthermore, wouldn’t a judiciary with greater independence than current exists in China be a critical component to developing rule of law?

It depends what you mean by "judicial independence". Like "rule of law" people mean very different things when they say "judicial independence."

Anon: it is not yet ready to abandon all the traditions and hidden rules that the society has been evolving around for hundreds or even thousands of years.

Neither is any other society on the planet. This is an example where I think of how people sometimes compare China to an idealized society that doesn't exist anywhere on the planet.

Just to give an example of an important "tradition" and "hidden rule." There is no law that says that the Queen of England has to appoint the head of the majority party in Parliament to be prime minister. It's a tradition and a hidden rule, but it's not a law.