Commercial arbitration has become the major dispute resolution venue for Chinese companies doing business abroad as well as for foreign enterprises in China. According to a 2022 survey carried out by CIETAC, 70% of the surveyed Chinese companies include arbitration clauses in their contracts with foreign counterparts, while 86% indicated their preference for out-of-court settlement of commercial disputes arising out of their overseas business activities. The nation’s highest court, the Supreme People’s Court (SPC), also supports and promotes commercial arbitration. In its 2015 Opinions on providing judicial services and safeguards for the construction of the Belt and Road Initiative (BRI), the SPC called upon people’s courts to “support the resolution of disputes by the Chinese and foreign parties through mediation, arbitration, and other non-litigation forms” as well as to “accurately comprehend and apply the New York Convention” when faced with requests for recognition and enforcement of foreign arbitral awards in China.
What if, however, a contract containing an arbitration clause also contains provisions that may be contrary to the Anti-Monopoly Law (AML), as they may implement anti-competitive agreements or abuse of market dominance? Can a determination regarding compliance or non-compliance with AML be determined by the arbitrator(s) in the context of arbitration proceedings prompted by a contract-related dispute? The Chinese lawyers frequently caution that there is no consensus as to the arbitrability of AML-related issues, and the parties should be prepared for a stand-off in court even if their contract contains an arbitration clause. Furthermore, there are observable traces of a litigation strategy to intentionally stall or delay arbitration proceedings by launching AML-based claims before a court and calling it to declare the respective contract invalid.
This discussion is quite timely, as China is in the process of revising its Arbitration Law in a bid to improve the credibility of the country’s arbitration system. Currently, competition law issues do not feature among either arbitrable or non-arbitrable matters listed in Arbitration Law. The 2021 draft amendments released by the Ministry of Justice in 2021 provided for the possibility to expand the range of arbitrable matters through other laws by adding the following provision: “Where the law provides that a party may institute civil proceedings in a people’s court, without clearly stating that the matter involved is not arbitrable, the arbitration agreement concluded by the parties which complies with the provisions of this [Arbitration] Law shall be valid”.
As the legislators discussed the possibility of expanding the list of arbitrable matters by adding investment, intellectual property, and anti-monopoly disputes, the Supreme People’s Court (SPC) moved in the opposite direction by stipulating that “if the plaintiff files a civil lawsuit in a people’s court in accordance with the Anti-Monopoly Law, and the defendant raises an objection on the grounds that there is a contractual relationship between the two parties and that an arbitration agreement has been established, it will not affect the acceptance of the civil monopoly dispute case by the people’s court” (2022 draft amendments to the 2012 Provisions on civil anti-monopoly disputes). Under these circumstances, the courts have developed an inconsistent judicial practice featuring divergent approaches towards the arbitrability of AML-related matters. The cases analyzed for the purposes of the present study revealed various factors affecting courts’ assessments of the scope of arbitration agreements and parties’ invocation of AML infringements in contractual disputes.
To address the aforementioned inconsistencies in judicial interpretations, enhance compliance with and private enforcement of AML, and encourage the alignment of China’s arbitration system with those of its major trading partners where arbitrability of competition matters is well recognized, the paper advances a call for conditional arbitrability of antitrust-related contractual disputes. First, it proposes to reflect the increased significance of AML in the amendments to the Arbitration Law by affirming the arbitrability of contractual disputes involving AML matters. Second, the paper calls upon the SPC to provide detailed guidance on substantive and procedural aspects to guide the courts in cases where AML-related questions arise in the context of contractual disputes covered by arbitration agreements. Third, the Arbitration Law should preserve the centralized system of judicial review concerning requests for setting aside or refusing recognition/enforcement of arbitral awards on public policy grounds. The proposal echoes the statement of the SPC Vice President, judge Tao Kaiyuan, who acknowledged in 2022 that “anti-monopoly disputes can be included in the scope of arbitration, but they should be treated in a classified manner, and only civil and commercial disputes should be submitted to arbitration”.
Life is complicated. Theory is simple: democracy is good and authoritarianism is bad. What is more, democracy in a robust sense requires a foundation based on the rule of law. Authoritarian regimes too may have law; however, instead of being constrained by it they rely on it only for instrumental purposes.
These statements seem commonsensical and just like everyone else, I too agree with them. There is a problem, however. It is the strictly binary way in which they are constructed. To stay that democracy is preferable to authoritarianism is not an especially illuminating statement. First of all, neither term is self-defining. To start with, whenever we are talking about modern centralized states, we are always dealing with some kind of representative democracy. However, every form representative democracy entails necessarily some kind of distortion, with some people winning and other people losing. One Senator cannot literally “represent” the views of 20 million people, even if we put aside the problem of legalized corruption known as campaign finance. There is no pure democracy as such—except maybe a direct democracy on the model of the Athenian polis, and even there the people who were the loudest, tallest, and the sweetest talkers—let us call them demagogues—had a disproportionate influence (not to mention the wholesale exclusion of women and slaves).
Second, while democracy is, by definition, superior to authoritarianism, that does not mean that there could not be other worthwhile ways of organizing politics. Democracy, for all its potential, has serious limitations as well. At least in its electoral form, it is not well-equipped to address questions of intergenerational justice (the unborn do not vote), nor to attend to the relationship between humans and their environment (trees have no standing, as Christopher Stone famously said)—the most fundamental relationship of all, as we find ourselves careening toward environmental collapse.
Put differently, democracy is ultimately a historical category, not the transcendental telos of all politics, and it can take dramatically different forms. Accordingly, it can work relatively well or not, depending on historical, social, and political circumstances. In its contemporary manifestations, it is very difficult to separate democracy from the histories of nationalism and capitalism, most notably. When we talk about democracy today, we are usually referring to a political union between some kind of liberal democracy and some form of capitalism—a system where elections function more or less as a giant calculator whose main task is to aggregate individual preferences.
Whatever the virtues and the limits of this brand of democracy may be, what troubles is me that especially after the end of the Cold War this particular understanding of democracy been universalized. It has become essentially a religion, and a rather jealous one: a monotheistic faith that does not recognize any valid alternative. It has become a missionary project that aims at nothing less than the standardization of political forms and political subjectivities on a global scale.
In a recent article, I use Shucheng Wang’s excellent book Law as an Instrument: Sources of Chinese Law for Authoritarian Legality as a point of departure for reconsidering the conventional opposition between liberal and authoritarian forms of legality. I argue that this opposition is in turn embedded in an even more elemental distinction between different state forms. Turning to Montesquieu’s The Spirit of the Laws, I first investigate the historical and geopolitical processes by which modern political theory reduced the political universe into three species of states (republics, monarchies, and despotisms) and then merely two (democratic and authoritarian states). Next, I turn to the contemporary genealogy of the concept of rule of law, which arose first as a critique of the rise of the administrative state in the West and then became a means to delegitimize socialist conceptions of legality. Finally, I conclude by focusing on the People’s Republic of China to evaluate the utility of assessing its legal order in terms of authoritarian legality as well as in terms of democracy more generally.
We should most certainly continue to improve existing democratic institutions, but we should not allow ourselves to be completely dazzled by democracy, whether as a political idea or a political practice. It must not foreclose our ability to imagine other kinds of politics and other kinds of institutions. A constitutional democracy is one way of coordinating life among humans, but it cannot be the only, or final, form of politics, especially in an age where our most urgent and intractable problems are global. Insofar as we are looking for non-liberal forms of justice and politics, maybe—just maybe—the historical experience of China can help us imagine alternatives, especially as the limits of electoral democracy are being tested today all around the world.
Teemu Ruskola is Professor of Law & Professor of East Asian Languages and Civilisations at the University Pennsylvania. He is an interdisciplinary legal scholar whose work addresses questions of legal history and theory from multiple perspectives, comparative as well as international, frequently with China as a vantage point. Ruskola is the author of Legal Orientalism: China, the United States, and Modern Law (Harvard University Press, 2013), co-author of Schlesinger’s Comparative Law (Foundation Press, 2009), and author of numerous contributions to law reviews, from the American Journal of Comparative Law to the Yale Law Journal. He is also co-editor (with David L. Eng and Shuang Shen) of a special double issue of the journal Social Text on “China and the Human.”
On April 16th this year, a group of 20 leading scholars and experts, as part of a government-funded research project under the China Academy for Social Sciences, released a draft for an Artificial Intelligence Law. The draft law alongside translations into English, French, and Spanish can be found here. A first version was published mid-2023 (and commented on by experts here). Expert law drafts like these are typically first steps towards legislative action, however, the degree to which legislators choose to rely on and work with expert drafts has varied in the past. We talked to the drafters about the thinking behind making a law on the possibly most complex and consequential subject of our decade – artificial intelligence.
Is there a need for an Artificial Intelligence Law in China?
China now needs legislation specifically for artificial intelligence (AI). AI has the potential to significantly enhance productivity by empowering various industries and creating production methods and business models that were previously unimaginable. However, it also poses disruptive threats, such as the recent development of generative AI, which allows individuals to easily generate complex images or even videos through natural language interaction. This clearly exacerbates issues such as misinformation and polarisation online. Additionally, the increasing demand for training data and computing power by AI raises concerns about intellectual property protection and fair resource allocation.
Therefore, there is a need for dedicated legislation to both promote the development of AI, maximising its benefits, and mitigate its threats. Such legislation would establish institutional arrangements at a macro level to stabilise expectations from the government, market, society, and other stakeholders.
In fact, as early as May 2023, the State Council of China released the “Legislative Work Plan of the State Council for 2023,” which proposed the preparation of a draft AI law for review by the Standing Committee of the National People’s Congress. In response, in its Legislative Plan released in September 2023, the Standing Committee indicated that it will “promote scientific and technological innovation and the healthy development of AI, improve the legal system concerning foreign affairs, and formulate, revise, repeal, and interpret relevant laws, or make relevant decisions as needed by the National People’s Congress and its Standing Committee.”
What are the main societal issues this law addresses?
The overall approach is to both promote the development of the AI industry and address its potential negative impacts.
(1) The issue of how the artificial intelligence industry should develop:
To address the development of AI, it is necessary to formulate specialized development plans, proactively establish computing power infrastructure, design personal information protection systems compatible with AI development, and take measures to encourage more data to be utilized in AI training. Additionally, legislation should encourage universities to cultivate specialized AI talents, require all levels of government to allocate specific portions of the budget to support AI development, and establish special tax incentives for AI research and development providers. In particular, we encourage the establishment of AI special zones at the national level, where these zones can enact specialized legislation authorized by the National People’s Congress, even in the presence of flexible provisions regarding national legislation.
(2) The potential negative impacts of artificial intelligence technology:
This includes concerns regarding the security of AI usage and how AI can be understood by its users. It also involves efforts to prevent AI from discriminating against individuals and causing other potential ethical harms.
Who is the drafting team – did you consult practitioners, officials in regulatory agencies, lawyers or judges in the drafting process?
Our drafting team comprises legal scholars, industry professionals, personnel from international organizations such ISO, and government research institutions [a list of participants can be found in the draft law].
We extensively solicited input from practitioners and maintained constant communication with regulatory authorities. Court rulings were particularly insightful for us, especially in drafting Article 70, which addresses the balance between AI development and intellectual property protection when AI-generated content infringes upon others’ intellectual property rights. This was directly inspired by rulings from the Guangzhou Internet Court regarding disputes triggered by AI-generated content.
What are some of the key principles that appear in this law and why did you include them?
Firstly, in governing AI, we specifically stipulate the principle of coordinated development and security, implementing inclusive and prudent supervision. This draws from our valuable experience in developing emerging industries in our country. The development of emerging industries inherently carries uncertainties, often leading to breakthroughs in existing legal systems. By emphasising the premise of security, we aim to foster more cautious intervention through regulation, thus preserving greater space for the development of emerging industries empowered by AI.
Secondly, concerning the purpose of AI governance, we explicitly define the principle of human-centeredness. Specifically, it aims to “ensure that humans can always supervise and control artificial intelligence, with the ultimate goal of promoting human well-being.” This serves as the anchor value for all regulatory activities.
Thirdly, as an extension of the human-centric principle, we affirm the principles of fairness and equality. This requires that the use of AI must not result in unjust discrimination against specific individuals or organisations. Additionally, it should fully consider the needs of minors, the elderly, and people with disabilities to prevent AI development from exacerbating the digital divide. Furthermore, we emphasise the principles of transparency, interpretability, and accountability, requiring developers to provide explanations of the purpose, principles, and effects of the AI they develop and use. Organisations or individuals involved in the development, provision, and use of AI should also be accountable for its actions.
Finally, human applications of AI must be sustainable, hence we establish the green principle, which mandates the development of energy-efficient and emission-reducing technologies for AI applications.
We see that other nations continuously iterate laws and policies, promote public computing power and data sharing, and establish intellectual property rights systems compatible with AI development. AI regulation necessitates extensive international cooperation as AI concerns the well-being and security of all humanity. Principles of open collaboration and joint formulation of international norms and standards around AI are thus included.
What legal rights and obligations are put on the table, and in how far are they new in China’s overall legal framework?
As users of AI technology, each of us is relatively disadvantaged compared to AI developers and providers. To bridge the power disparity between the two sides, the AI model law prominently emphasises the obligations for AI developers and providers. These include obligations to ensure safety, to manage vulnerabilities, to offer remedial channels and to notify subjects when discovering risks, as well as obligations to establish risk management systems, and to conduct ethical reviews, among others.
We also establish negative list system for the obligations of AI developers and providers. For AI entering the negative list and serving as foundational models, we will further supplement and strengthen these obligations. The negative list, with its contents regularly updated, is laid down by the national AI regulatory authority based on the importance of the AI, as well as the potential harm to national security, public interests, social stability, environmental protection, etc., caused by attacks, tampering, destruction, or illegal theft and utilisation.
How can subjects raise rights violations, what procedures and mechanisms are there? What role can administrative litigation play, are there other, more feasible channels?
According to this question, we can distinguish two types of “subjects.” One type is AI developers and providers. According to Article 72 of the AI model law, if they disagree with administrative acts such as administrative licensing or penalties issued by administrative agencies, they can initiate administrative reconsideration or administrative litigation. The other type includes other subjects, such as AI product users or third parties affected by AI, such as those whose intellectual property rights have been infringed by AI products. For these subjects, if they are dissatisfied with the aforementioned administrative acts and have a direct interest in their own rights, they also have the right to initiate administrative reconsideration or litigation, such as demanding stricter supervision by administrative agencies. Of course, if the rights of these subjects are infringed upon, according to the provisions of Article 70, they can also file civil lawsuits to claim compensation.
It is important to emphasize that promoting AI development is a key objective of this law. Therefore, we have also established a system of compliance and exemption for AI developers and providers. Regarding civil liability, for cases where AI infringes upon others’ intellectual property rights, according to Article 70, as long as the provider of the AI product that infringes upon others’ rights can prove that they have labeled the AI-generated content, notified users through user agreements not to infringe upon others’ intellectual property rights, and established rules for intellectual property protection and a complaint mechanism within their own organization, then the provider may not be held jointly liable with the developer. Regarding administrative liability, if the internal compliance construction of AI developers and providers meets effectiveness standards after assessment, according to Article 75, they may be exempted from punishment or given lenient punishment. Similar provisions apply to criminal liability.
China’s internet regulatory agencies have been issuing regulatory documents related to AI and data in recent years. These regulatory arrangements are exploratory in nature and provide valuable experience for future specialised AI legislation. Our drafting of the AI model law weaves in these regulations. For example, the requirement for marking AI-generated content originates from regulatory documents concerning generative AI issued in 2023.
Compared to existing regulations related to AI, the AI model law is more systematic. If we consider existing AI-related regulatory documents as “patches” where a document is issued to address a specific problem, then the AI model law is akin to a “tailored suit” designed based on the characteristics of AI technology. It aims to provide systematic and structural solutions for AI governance.
What legislation from other countries did you consult, what do you think China’s AI law can learn from laws elsewhere?
We have referenced legislation and regulatory policies related to AI from the United States, the European Union, and the United Kingdom. These countries universally emphasise the threats posed by AI but are simultaneously committed to its vigorous development. Concerning AI threats, issues such as discrimination, misinformation, and intellectual property are widely acknowledged. In terms of regulatory strategies, we have drawn inspiration from the EU’s tiered classification management of AI and its institutional design for AI open-source to some extent.
Legislators globally deal with similar issues when it comes to regulating AI. What contribution can the ideas in this model law bring to the frontiers of AI legislation?
In my opinion, the AI model law primarily demonstrates innovation in both intellectual property protection mechanisms and open-source governance.
Regarding intellectual property protection, Article 10 of the AI model law emphasises the need to protect intellectual property rights in the AI field while also advocating for the development of statutory licensing and fair use systems compatible with AI development. This reflects the balance between rights protection and technological advancement. It authorises the national intellectual property regulatory authority to establish supporting systems, addressing the issue of fair and reasonable distribution of benefits arising from AI technology development. Article 71 further specifies the allocation of civil liability in cases of AI infringement of intellectual property rights. In principle, both AI providers and users should bear joint liability for AI infringement of intellectual property rights. However, the law also establishes conditions for the exemption of liability for AI providers if they 1. appropriately label AI-generated content; 2. notify users through user agreements not to infringe on intellectual property rights; 3. establish intellectual property protection systems, with measures such as warning or punishment for infringement, and 4. establish an intellectual property complaint mechanism. These provisions are to encourage AI providers to make more compliance efforts by reducing legal liability, thus seeking a balance between technological development and rights protection. It is worth noting that this legislative design to some extent draws on the latest judgements of the Guangzhou Internet Court.
Regarding open-source governance, we believe that open-source will benefit the further development of AI technology. Therefore, the law encourages open-sourcing of AI technology as a policy orientation. The state encourages the establishment of open-source development platforms and the setting up of open-source AI foundations. Promoting secure and compliant applications of open-source software projects is recognised as a goal that the law should foster. Specific encouragement policies include Article 21, which encourages governments at all levels and state-owned enterprises to procure open-source AI products that comply with national standards. Article 22 authorises the State Council to establish special tax incentives for open-source AI. Article 59 stipulates that the national AI regulatory authority should develop specific compliance guidelines for open-source AI developers. Article 71 also provides liability exemptions for AI where it provides open-source resources. Specifically, for certain code modules of AI, as long as their functionality and security risks are clearly disclosed, no legal liability will be borne for damages caused by them. For AI itself, as long as the provider can prove that a sufficiently strict governance system is in place and relevant security governance measures are implemented, liability can be mitigated or exempted.
Which state organs are relevant actors in the legal framework you envision?
Given the broad scope of AI governance, we recommend establishing a dedicated national-level AI regulatory agency. Additionally, we suggest setting up corresponding AI regulatory agencies within provincial-level governments and some municipal governments.
How does the path forward look like – what do you hope to achieve by publishing this model law?
This is the second version of an AI model law. We aim to propose a comprehensive legal framework that provides guidance for legislators to advance related legislation, anticipates market and industry development, and seeks to harness the wisdom of scholars from around the world to collectively improve the governance system surrounding AI.
We thank Tianhao Chen from Tsinghua University and the drafting team for sharing their thoughts.
The main entrance of the Supreme People’s Court of China in Beijing Photo by Rneches
How does the Chinese political-legal system operate in the Xi Jinping era? This article published in the China Law and Society Review provides a detailed discussion of the poorly understood operations of the Supreme People’s Court (SPC) including its intricate interactions with central Party and state institutions, against the background of strengthened Party leadership. It provides insights into specific aspects of the Party’s leadership of the judiciary and its implications, usually unseen functions and operations of the SPC, and the link between Party policy, the judiciary, and the development of Chinese law.
I focus on the roles of the SPC in supporting “foreign-related rule of law” as an example of how the work of China’s highest court has evolved in the Xi Jinping New Era to support more robustly major national strategies. The article examines functions of the SPC little explored previously, because some are only partially transparent. I first summarize developments concerning the strengthening of Party leadership over political-legal institutions, because those have a direct and indirect impact on the SPC’s foreign-related judicial work. I highlight the greater focus on the SPC’s leadership’s fulfillment of political obligations and responsibility to the Party leadership. Providing appropriate judicial support for national strategies is an important way in which the SPC as a political-legal institution fulfills its political obligations to the Party leadership.
The SPC functions identified as most important in developing foreign-related rule of law are, first, policy-making and guidance of the lower courts; second, “law-making;” third, case hearing and selection; and fourth, coordinating and cooperating with central Party and state institutions. The characterization of the functions is original to this article. The non-case hearing functions are linked in some way to hearing cases and are ones the SPC has always performed.
In contrast to most apex courts globally, the work of the SPC in supporting “foreign-related rule of law” is more focused on policy-making and influencing legal and judicial policies; providing guidance to the lower courts, what this article describes as “law-making”; and coordinating and cooperating with other central Party and state institutions, rather than making judicial decisions.
First, part of the SPC’s role is to create, amend, and implement judicial policy in response to or in anticipation of the impact of changes in Party and state policy or other social, economic, or legal changes. One of the principal ways in which the SPC publicizes new or amended judicial policy is by issuing judicial policy documents. These documents guide and inform the lower courts about new or readjusted judicial policy and inform related central Party and state institutions about these developments. They also signal to the Party leadership that their initiative is being implemented. In some areas of law, the SPC leads the legal and judicial policy initiative, while in others, it provides its expertise when other institutions take the lead. The policy documents and any typical cases issued in addition to or in lieu of a policy document contain both political and substantive guidance intended to guide lower court judges both in frontline and leadership roles. These documents may not be cited in court judgments or rulings but may have an impact on judicial thinking.
Second, an important but less-understood part of the role of the SPC in contributing to the development of China’s foreign-related legal system is “law-making.” This characterization is meant to convey the SPC’s contribution to legislation described by the SPC as “actively cooperating with foreign-related legislation” (积极配合涉外立法), not as a formal assertion that the SPC makes law. This contribution takes several forms, not all of them formalized in law. The first type is provided by the Legislation Law which authorizes the SPC to submit legislative bills to the National People’s Congress (NPC), and the NPC Standing Committee. The second type is by drafting and issuing judicial interpretations, as authorized by the Organic Law of the People’s Courts and the Legislation Law. The SPC has the authority to issue meeting minutes (conference summaries) and similar documents which have a less certain formal authority but are highly persuasive in practice.
Two other types lack specific legislative authority but are important ways in which the SPC contributes to legislation, particularly foreign-related legislation: providing support to the NPC and the NPC Standing Committee when it drafts legislation; and providing support to the Ministry of Justice and other Party and state institutions when those institutions draft legislation that is eventually submitted to the NPC or the NPC Standing Committee. These two ways combine the SPCs indirect law-making role with its cooperation role. The extent to which the SPC participates in “law-making” in foreign-related matters is not entirely clear because related documents are made public sparingly.
The people’s courts are a highly political professional institution, and a highly professional political institution (人民法院是政治性很强的业务机关，也是业务性很强的政治机关)
Official SPC media channels
Third, the SPC decides some cases involving foreign-related commercial law and issues some cases as guidance, either as guiding or typical cases. It decides some cases relating to arbitration through an administrative procedure, others through retrial or second instance procedures, and others when certain selected SPC judges sit as panels of the China International Commercial Court. Additionally, the SPC issues cases as guiding, or more often typical cases as a form of guidance. The SPC occasionally issues guiding cases but more often issues typical cases to provide political and substantive guidance for the lower courts, sometimes linked to a policy document.
Fourth, one of the unrecognized functions of the SPC is coordination with other central Party and state organs regarding specific legal issues, based on bureaucratic custom. This work is only partially visible. The SPC has coordinated and cooperated with other central Party and state institutions on a broad variety of legal matters for many years, but it appears to be little discussed in English-language literature. The coordination and cooperation take a variety of forms, and which institutions and departments are relevant depends on the matter under consideration. For example, the SPC provides support to the Ministry of Foreign Affairs or other ministries that lead treaty or convention negotiations, such as the Ministry of Commerce.
The article concludes that the SPC’s foreign-related legal expertise, as shown by the Politburo’s November, 2023 collective study session on foreign-related rule of law, has become significantly more important to China’s political leadership and other central-level Party and state institutions. Its significance to the political leadership is in its work in creating a body of foreign-related law. Given that the Party leadership increasingly stresses political leadership of the courts and political competence of members of the judiciary, carrying out the functions described above requires SPC judges dealing with foreign-related matters to have both a high degree of political consciousness and technical expertise. Why? As the SPC media often say, “the people’s courts are a highly political professional institution, and a highly professional political institution” (人民法院是政治性很强的业务机关，也是业务性很强的政治机关).
Susan Finder is a long-standing observer of the Chinese judicial system with more than 30 years of experience. She is a member of the international commercial expert committee of the China International Commercial Court (CICC) of the Supreme People’s Court and on the committee of the Shanghai International Arbitration Center. The views expressed in this article are her own, not those of either institution. She is a Distinguished Scholar in Residence at the School of Transnational Law of Peking University (Shenzhen), where she teaches about judicial reform in comparative perspective. Her blog, the Supreme People’s Court Monitor, is arguably the most authoritative scholarly resource on developments around the People’s Republic of China’s highest court. Follow her on Twitter @SPCmonitor or get in touch per email at susan.finder[at]outlook.com
In response to an apartment fire in Urumqi which killed eleven residents in November 2022, Shanghai residents took to the city’s Urumqi Road, protesting peacefully against China’s zero-covid policy. While the protests resulted in the official end of nearly all Covid-19 related restrictions, several participants were detained and sentenced for picking quarrels and provoking trouble (Criminal Code Art. 293). Photo by Cinea467
However, picking quarrels is not confined to politically sensitive cases. Authorities also employ it to enforce state-approved moral standards, leading to the criminalization of individuals for morally contentious actions or speech on social media. For instance, a Douyin (Chinese TikTok) creator received a prison sentence for pretending to engage in a fictional fight against imaginary opponents, deemed as provoking social disorder by local police ((2019) 湘1124刑初119号).
Picking quarrels is legally defined in Article 293 of China’s Criminal Code, encompassing the following actions:
(1) Arbitrarily attacking people with particularly grave circumstances;
(2) Chasing, intercepting, or berating others with particularly grave circumstances;
(3) Forcibly taking, destroying, or occupying public or private property with serious circumstances;
(4) Making a commotion and causing serious disorder in a public place.
Penalties range from supervised release to five years of imprisonment, with up to ten years for those repeatedly inciting others to disrupt social order.
However, the broad and vague application of this offense makes it difficult to establish a direct link between Article 293 and many specific picking quarrels cases. Sub-category 4, “making a commotion,” acts as a catchall within a catchall, allowing authorities to prosecute objectionable acts or speech under the pretext of causing disorder in public venues. Importantly, despite whether a case is politically motivated or not, picking quarrels is applied arbitrarily in both situations. This raises an intriguing question: to what extent is the boundary between political and non-political spheres significant within an authoritarian legal system like China’s?
Today, scholarly debates on “authoritarian legality” in China offer varying views. Optimists view the centralization of power through legalistic means positively, while critics argue that the Chinese legal system, as a whole, deviates from the rule of law, especially under Xi Jinping’s leadership. The theory of legal duality suggests the coexistence of a genuine legal order and a political agenda-driven state. However, many of these arguments assume China’s authoritarian legality is inherently tied to how strong the political nature of the issue is—whether it’s deemed “political” or not.
Despite ongoing debates, the significance of law in governing authoritarian systems is widely acknowledged—and it becomes crucial to grasp the essence and characteristics of authoritarian law. This article introduces the concept of legal rationality to illuminate authoritarian legality. It proposes that, whether a system is democratic or authoritarian, legal rationality denotes the intrinsic value of law that is publicly accessible, transparent, and consistent, serving to restrict the arbitrary discretion of individuals in positions of authority. Thus, if there is a decline in legal rationality within an authoritarian system, then it probably does not solely result in more political prosecutions but could also lead to heightened arbitrariness in non-political domains as well.
In China, post-Mao legal reform (since 1978) aimed to establish legal rationality for prosperity, stability, and regime legitimacy, and of course—also with the hope of helping to prevent political catastrophes like Mao Zedong’s Cultural Revolution. However, under Xi Jinping’s leadership, there has been a decline of legal rationality in both political and non-political spheres. This article offers two explanations for this decline. First, in an authoritarian system, officials tend to exercise arbitrary power as a convenient means to not only exert political control but also address governance issues (they often benefit personally from such actions as well). Second, China’s partial legal rationality has been mainly maintained through self-restraint by the CCP in the post-Mao era. As this self-restraint weakens, both political and non-political spheres are increasingly vulnerable to prerogative power erosion.
The example of picking quarrels vividly illustrates the decline of legal rationality in Xi’s China, leading to arbitrary actions within the political realm and routine criminal justice system. Throughout Mao Zedong’s reign from 1949 to 1978, hooliganism functioned as a versatile crime, diverging from legal rationality by being widely applied across both political and non-political contexts. China’s 1997 Criminal Code has replaced hooliganism with picking quarrels. “Subsequent efforts in the 2000s and early 2010s aimed at rationalizing picking quarrels through clarification of legal terms, moral detachment, and to a limited extent, depoliticization.
However, as mentioned earlier, Xi Jinping’s tenure saw a regression, reversing the trend of rationalization observed in earlier reforms. In both political cases and cases with less political nature, this excessive application of picking quarrels comes at the cost of the rationalization of China’s criminal legal system that had been developed during the reform era. This erosion extends beyond hyper political cases, affecting everyday legal and governance systems, blurring the line between political and non-political realms.
The decline of legal rationality across political spheres and ordinary justice in the case of China highlights the necessity of reevaluating our understanding of authoritarian systems—it might be the (ir)rationality of the law, rather than its political nature, that defines authoritarian legality.
Luo Jiajun is a Research Scholar in the Equality Rights Program at the Faculty of Law, University of Hong Kong. Luo recently received a Dissertation Year Fellowship from HKU for his outstanding (5%) PhD thesis titled “Chinese Courts: Unequal Justice”. From 2021 to 2023, he was a China Law Fellow at Georgetown University.He can be emailed atjiajunlok[at]gmail.com.
A new paper by Tianhao Chen, Wei Xu and Xiaohong Yu
In 2015, the revision of China’s Administrative Litigation Law introduced the Chief Officials’ Appearance System (COAS). The system requires agency leaders themselves, rather than their legal counsel, to appear in court and defend their administrative actions. Unlike other post-2014 legal reforms aimed at empowering the judicial system and fending off local protectionism, the COAS uniquely enhance the engagement of political officials in the judiciary process. This approach is based on the belief that increased participation will help officials to gain a better understanding of public concerns and improve administrative litigation quality. The detailed workings of the COAS were laid out in this previous blogpost by Nina Rotermund.
In this comprehensive study, we set out to assess how and whether the optimistic goals set for the COAS were achieved. Through an empirical analysis of 1551 administrative litigation cases in a Beijing local court and extensive field research across 12 other provinces, the study uncovers unexpected outcomes that merit a closer examination.
Contrary to official expectations, we find that the COAS reproduces the administrative grievances that it is tasked to resolve. Data from Beijing revealed that plaintiffs were 5.08 times more likely to appeal or file a new suit over the same issue when chief officials made court appearances. This tendency was attributed to a mismatch between the plaintiffs’ expectations for meaningful engagement and the often-detached demeanour of the officials, who sometimes resorted to reading from prepared statements without genuinely addressing the plaintiffs’ concerns. This lack of meaningful interaction left plaintiffs dissatisfied, propelling them to pursue further legal avenues.
Moreover, the number of administrative cases overall and the rates of the government losing cases before district leaders’ court attendances in Beijing’s 16 districts were not significantly higher than after they appeared in courts, indicating that lawful governance did not improve. This issue is related to the officials’ generally apathetic approach to court appearances. Statistics indicate that 73.6% of officials planned to conduct the required court visits only in the fourth quarter, when the annual cadre evaluation was underway. This figure is disproportionately higher than the proportions in the other three quarters. Further, the amount of officials’ appearances in court barely surpassed the number of appearances required to fulfil the performance evaluation criteria. This indicates that officials’ appearances are more about fulfilling administrative assessment requirements rather than genuinely improving lawful administration.
“[…] plaintiffs were the so-called nail households (dingzihu 钉子户), ones who refused to relocate and came to court only to claim better compensation. They wouldn’t be pleased by simply meeting the officials in person. Instead, sometimes they even interrogated the officials and we had to interrupt and stop them.”
Judge in Qinghai, August 2022
Despite this, the study also observed surprisingly impartial and even strategic responses from the court. Statistical analysis of Beijing data shows that the involvement of district leaders in court did not skew judicial outcomes in favour of the government. This is partly due to the strategic appointment of high-ranking judges in cases involving chief officials, ensuring a balance of authority in the courtroom. Moreover, the analysis reveals a nuanced trend wherein courts are more likely to rule against government officials who are nearing the end of their term, suggesting a strategic consideration of future relations with the administrative agencies.
Expanding the study nationwide revealed similar trends across China, albeit with regional variations. Through the “China Judicial Politics Database,” which includes 70% of publicly available cases, we identified 28,805 instances of official court appearances. Of these, a mere 146 involved officials at the bureau and deputy bureau levels, noting that the overall frequency of government leaders appearing in court remains low nationwide. Interviews conducted with judges, lawyers, and government officials from 12 provinces, including Zhejiang, Henan, Guizhou, Jiangsu, Guangdong, Sichuan, Qinghai, Shaanxi, Tianjin, Liaoning, Hebei, and Xinjiang, presented a complex but consistent picture. Similar to Beijing, official court appearances were rare and typically motivated by assessment requirements, leading to tense courtroom dynamics between disinterested officials and pragmatic plaintiffs. Courts employed diverse strategies to manage their interactions with the government, sometimes using the theatrical nature of appearances to exert pressure.
“[…] sometimes I would intentionally tolerate plaintiffs’ emotional expressions to exert extra pressure on administrative agencies.”
Judge in Zhejiang, April 2022
In sum, the study reveals that, contrary to what the creators of COAS had expected, the COAS has not significantly ameliorated administrative dispute resolution. Instead, it has resulted in a renewed triad of administrative litigation: apathetic state agencies, increasingly agitated plaintiffs and strategically empowered courts.
The unintended impacts of the COAS carry certain implications. Despite previous views of administrative litigation in China as no more than a “frail weapon” due to political constraints, the courts appear somewhat empowered, benefiting from the cumulative effects of several reform measures implemented over the last four decades and the strategic behaviours of judges. Additionally, plaintiffs’ willingness to pursue further legal action, fuelled by an increased legal awareness and desire for justice, challenges the notion that official appearances alone would placate citizens. Still water runs deep, and the perverse impact of the COAS implies that the rule-based approach to dispute resolution would be a more desirable and effective route than the paternalistic approach.
The paper ‘Administrative Litigation in China: Assessing the Chief Officials’ Appearance System’ was published in The China Quarterly (free draft available here). Tianhao Chen is an associate professor at the School of Public Policy and Management at Tsinghua University. His research focuses on administrative law, administrative agreements, judicial governance and technology ethics. His work has been published in Chinese Journal of Law, China Legal Science and Law Science.
Wei XU is a PhD candidate studying at the School of Public Policy and Management at Tsinghua University. Her research focuses on platform antitrust, judicial reform, public administration and law.
Xiaohong Yu (corresponding author) is an associate professor in the department of political science at Tsinghua University. Her research focuses on Chinese politics, judicial politics and empirical legal studies. Her work has been published in Journal of Empirical Legal Studies, The China Review and Tsinghua University Law Journal.She can be contacted at xyu[at]tsinghua.edu.cn.
In addressing artificial intelligence, the Chinese government has multiple roles: it simultaneously acts as a policymaker, an investor, a supplier, a customer, and a regulator.
In recent years, China has emerged as a pioneer in formulating some of the earliest and most comprehensive legislations regulating recommendation algorithms, deepfakes, and generative AI services. This has left the impression that China has stood at the forefront as a global leader in regulating AI. Matt Sheehan, a highly-regarded expert in Chinese AI policy suggests that the U.S. can gain valuable insights from China’s approach to AI governance. Industry observers therefore view Beijing’s regulatory approach as a potential obstacle to Chinese innovation. Such concerns are not unwarranted. In 2020-2022, China undertook a sweeping crackdown on its tech firms. The erratic nature of Chinese tech policy has unnerved investors, precipitating severe and unintended consequences of deterring investment and entry into the consumer tech business.
However, this perception that China has stood at the forefront in regulating AI fails to account for the intricate dynamics of the Chinese political economy. Authoritarian states face a dual-challenge with emerging technologies, as these technologies can empower civil society on one hand, while enhancing government surveillance capabilities and strengthening social stability on the other. Furthermore, technological advancements are crucial for economic growth and national competitiveness. To balance the need for stability and the desire to foster innovation, China has adopted a bifurcated approach to AI regulation: strict information control juxtaposed with industry-friendly regulation. This approach keenly reflects the complex utility function of the Chinese Communist Party, who seeks legitimacy through multiple sources including growth, stability, and nationalism.
Yet striking a balance between regulation and innovation is far from easy. The Chinese government assumes multiple roles in the AI ecosystem as a policymaker, an investor, a supplier, a customer, and a regulator. Given the government’s extensive involvement, it lacks a strong commitment to regulate the industry. Moreover, although AI can pose many social harms, they have not yet evolved into immediate threats to social and political stability. AI safety risks remain speculative, despite warnings from experts. The Chinese government also recognizes the economic benefits AI promises, amidst the intense Sino-US tech rivalry. The tightening of US export restrictions, which hinder Chinese AI firms’ access to advanced chips, have only intensified this competitive pressure, thereby diminishing the government’s incentive for strict regulation.
The Chinese government also faces significant constraints in imposing strict regulation on AI. China’s tech crackdown in 2020-2022 has demonstrated that harsh regulatory measures can generate strong repercussion in the market. Since early 2023, the Chinese economy has entered into a slump. The government’s focus has thus shifted towards revitalizing the economy and boosting market confidence. Consequently, despite appearances of proactive intervention, Chinese regulators have focused on fostering AI growth. The regulatory rules being adopted have sent strong pro-growth signals while attempting to facilitate stakeholder coordination to advance AI development. This close integration of industrial policy and law is a defining feature of Chinese AI regulation.
Understanding the nuances of China’s AI regulatory strategy is crucial not only for predicting the trajectory of its technological development but also for assessing its implications on the global tech rivalry. Major jurisdictions including both the U.S. and the EU are actively exploring the establishment of a comprehensive AI regulatory framework, as exemplified by the AI Act and Biden’s executive order. Leading US AI firms are involved in various litigations and face mounting pressure to negotiate licenses with media for the use of their content as training data. In contrast, China’s relatively more relaxed regulatory environment may offer its AI firms a short-term competitive advantage over their EU and U.S. counterparts.
Meanwhile, China’s approach could give rise to serious regulatory lag. This situation is aggravated by China’s weak market conditions, poor legal institutions, and the tightly coupled political system, potentially leading to latent risks that could escalate into AI-related crises. For example, the Chinese government is invigorating a “whole of society” approach to push forward AI development without necessarily taking effective precautionary measures. Under such a command-and-control strategy, by the time the full impact of AI harms become apparent to top policymakers, it could be too late for effective reversal or mitigation. This dynamic complexity of China’s AI regulation therefore underscores the urgent need for increased international dialogue and collaboration with the country to tackle the safety challenges in AI regulation.
‘Ecological civilisation’ has been a core pillar of the Communist Party of China’s political agenda in recent years. It highlights the growing importance of balancing economic growth with environmental protection. Environmental degradation comes from economic growth, economic growth relies on market functioning, and the market runs on private contracts. Private law doctrines, such as freedom of contract and limited liability of corporations, provide the legal and institutional framework that enables market actors (especially those with stronger bargaining power) to reap the profits from market transactions, while legally outsourcing the environmental externalities to the general public. Think of a cheap pair of jeans – it is cheap because its enormous environmental costs are not factored into its pricing and such pricing is possible because contract law allows/encourages us to only care about our immediate party (‘privity of contract’).
Granted, public environmental regulation poses significant limitations to private dealings. But if private law causes the problem in the first place, maybe we could also think about how we can address the problem from within private law. In the civil codification project since 2017, though the Chinese legislators refrained from a complete overhaul of existing civil legislation, they did endeavour to reconcile the tension between private autonomy and public environmental good. Among others, Art. 9 of the Chinese Civil Code (‘CCC’), which is often known as the ‘green principle’, prescribes sustainability as an overarching principle of private law. It reads: When conducting a civil activity, a person of the civil law shall act in a manner that facilitates conservation of resources and protection of the ecological environment.
This principle is highly abstract – just as abstract as other established principles in private law such as good faith and public policy. Judges in China, however, have not shied away from engaging with this principle, often in a rather creative way. For example, if I plant trees on your land illegally, you would think that you can rightfully ask me to cut them down. But several courts[1] said no – as trees could help prevent soil erosion. In another case,[2] the court reversed a homeowner association’s resolution that prohibited a homeowner from installing an electric vehicle charging station in the parking lot. The decision highlighted the scientific fact that electric cars can reduce fossil fuel consumption and have zero tailpipe emissions. (A side note: the Chinese authority has been actively promoting electric cars since the early 2000s.)
The green principle can be read as an attempt to align private law with the Constitution, which in the eyes of Chinese jurists is the ‘mother law’ that gives birth to other fields of law. Art. 26 of the Chinese Constitution provides: ‘The State protects and improves the environment in which people live and the ecological environment. It prevents and controls pollution and other public hazards.’ The green principle is even part of a broader political project, namely ecological civilisation, which radiates to the entire state apparatus. For example, the Supreme Court has been actively mobilising local courts to provide ‘judicial services’ in order to achieve carbon peak and carbon neutrality, which includes the imperative of ‘correctly applying the green principle’. Ecological civilisation is not only the task of the state as Art. 26 of the Constitution seems to indicate. With Art. 9 CCC, it is indicated that every private person, too, is not part of the transition towards a more sustainable future.
The green principle represents a welcome approach to opening up private law doctrines for environmental concerns. But many actually find such a politically laden principle disruptive to the system of private law. In their eyes, private law centres around interpersonal autonomy and deals with direct exchanges between the parties themselves. Of course, they defend party autonomy and demarcate a clear boundary of private law for a reason – the tentacles of the party-state are already way too present almost everywhere. Sure, we need a proactive and responsive state to fight climate change and save the environment, but what if the state itself is inconsistent in its commitments? For example, China was building significantly more new coal plants in 2022 to address the electricity shortage and was turning forests into farmland to ease the food crisis. Sure, we need to involve private parties to internalise the environmental costs, but what if the green principle is instrumentalised as another gateway for party politics to creep into civil society? For example, the word ‘resources’ under Art. 9 CCC has not only been interpreted as ‘ecological resources’ but also as ‘social resources’[3] and ‘judicial resources’,[4] which carry significant indeterminacy that can only be determined by the judges’ political sensitivity. The green principle tells a rosy story of an ecologically responsive private law of the 21st century, but, what will the real outcome be?
Capture of the video installation “Unerasable Characters II” by Winnie Soon: Drawing on the Weiboscope database, she designed software that visualizes Weibo posts that have been erased on a daily basis during the pandemic. Exhibit “Data Relations“, Australian Centre for Contemporary Art, Melbourne
Internet service providers (ISPs) globally are increasingly legally obliged to monitor and regulate content on their service. In general, such obligations may emanate from explicit legislative mandates, such as Article 17 of the EU’s Directive on Copyright in the Digital Single Market, or from the imposition of strict liability for user-generated content by judicial authorities, effectively requiring intermediaries to actively monitor and moderate illegal content to circumvent liability. China implemented a dual-track legal mechanism on content moderation that emphasizes the public and private distinction. Specifically, ISPs are exempted from monitoring obligations in private law, while public law explicitly imposes monitoring obligations for ISPs, requiring them to take on the role of gatekeepers who have a responsibility towards the public interest. This study aims to explain what legal measures China adopted to serve the needs of content control and compares the framework with the regulatory approach of the EU.
What is the current legal framework for content moderation?
On the one hand, the Chinese jurisprudence has reached consensus that the principle of prohibition on general monitoring obligations applies in private sphere and leaves certain room for monitoring obligations in cases of specific natures. In its authoritative interpretation of Article 1197 of the Civil Code, the Legislative Affairs Commission referred to international conventional practice and clarified that ‘ISPs that provide technical services are not subject to general monitoring obligations,’ but did not preclude the possibility of monitoring obligations of a specific nature. Moreover, the Supreme People’s Court (SPC) clarifies that the court shall not determine an ISP is at fault where it fails to conduct proactive monitoring regarding a user’s infringement. In another Guiding Opinion, the SPC explicitly stated that ‘[courts shall] not impose a general obligation of prior review and a relatively high degree of duty of care upon the ISPs […].’
On the other hand, under public law, ISPs are required to review, monitor, and inspect information prohibited from being disseminated by laws and administrative regulations. When they ‘discover’ illegal content disseminated on their services, they must fulfil their proactive monitoring obligations by taking certain measures to prevent the transmission of such content. In addition to technical filtering mechanisms, platforms must also employ trained personnel to conduct human reviews of uploaded content. Otherwise, they will face penalties for their failure to perform their monitoring obligations. Unsurprisingly, the scope of monitoring can be considered comprehensive, as the ISPs are required to monitor almost all online content in accordance with various laws, administrative regulations, and even ‘relevant state provisions.’
How did online platforms implement legal rules in practice?
Law enforcement agencies fully utilize the advantages of platforms in discovering, identifying, and handling illegal content, and entrust ISPs to proactively engage in collateral censorship through private ordering. Thus, platforms’ house rules act as a critical supplement to state legislation by restricting otherwise-legal content or activities. In practice, thesehouserules classify all the illegal, harmful and undesirable content as prohibited content, and ignore the distinction between prohibited content and undesirable content made in relevant administrative regulations. In fact, major Chinese platforms adopted a crafty approach by introducing more blurred and abstract concepts to explain the ambiguous language of legislation, thus worsening the predictability of house rules. Although commentators voice concerns about legal uncertainty deriving from ambiguous rules, the platforms frame them as ‘flexible’. With their expansive monitoring and an erratic and opaque decision-making process, mega platforms exercise much stronger control over the flow of information, regardless of more serious consequences that impact the fundamental rights of users.
On the one hand, in the broad T&Cs and Community Guidelines, a vast space is left for platforms to apply alternative mechanisms, which are often not transparent and not subject to external oversight, to moderate content. Within this frame, platforms adopt diverse measures to conduct content moderation, both preventive (ex-ante) and reactive (ex-post). Reactive measures such as region- and service-specific methods are employed to control the availability, visibility and accessibility of certain content, or restrict users’ ability to provide information, independently or in response to government mandates. Meanwhile, preventive content moderation, which aims to make content contingent on the prior consent of a designated public authority, usually takes the form of automated content filtering of unpublished content.
On the other hand, platforms extend the scope of content moderation with the substantial quasi-legislative power obtained from house rules. By introducing more uncertain concepts to elaborate on vague terms in public law, the predictability and transparency of house rules are further diminished. Under this parental state, other types of political heterodox speeches, legal speeches that violate widely held social norms and moral beliefs, or infrastructural values of platforms, are removed or blocked in practice.
When lacking systematic and institutional constraints, the constantly expanding content moderation practices are characterized by being quasi-legislative (T&Cs and Community Guidelines), quasi-executing (content moderation measures), and quasi-judicial (determination of illegal and harmful). Evidently, under the top-down collateral censorship mechanism, platforms try to adopt various stricter content moderation measures and further extend the scope of monitoring to eliminate potential uncertainties and risks. Such practices can further empower platforms, giving them greater control in terms of moderation technologies used and the making of norms for acceptable online content.
How did Chinese courts interpret content moderation in judicial practice?
Public law monitoring obligations encompass not only content that violates public law norms, but also content that violates private law norms. In judicial practice, the public law monitoring obligation is often interpreted as a duty of care.1 Courts thus deem that ISPs failed to fulfil their duty of care where they failed to perform public law monitoring obligations against online illegal content. The logic behind such legal reasoning indicates that, by virtue of their public law monitoring obligation, ISPs are presumed to have a corresponding monitoring obligation under private law. More importantly, courts implied that platforms should bear civil liability if they failed to perform their public law monitoring obligations.
In addition, fulfilling public law monitoring obligations may expose platforms to civil liability due to their actual knowledge of the existence of infringing content. In other cases, courts ruled that platforms risk losing their safe harbor protection if they take proactive measures to address illegal and harmful content.2 In certain exceptional circumstances, the level of duty of care for ISPs may be significantly elevated. For example, an ISP providing information storage space services is deemed to have constructive knowledge of a user’s infringement of the right of communication to the public on information networks, if the ISP substantially accesses the disputed content of popular movies and TV series or establishes a dedicated ranking for them on its own initiative. The legal reasoning in this decision implies that, since ISPs must fulfil their public law monitoring obligations, they should also be aware of potential copyright infringement within the content being monitored.
Therefore, platforms face a dilemma: If they fail to fulfil their monitoring obligation set by public law, they are deemed to have committed an act that contributes to the occurrence of the infringement, for which they must assume administrative liability; at the same time, they need to conduct ex ante monitoring of content uploaded in order to fulfil the monitoring obligation set by public law, which means they have had constructive knowledge of the existence of infringing content and thus may bear a higher level of duty of care. Where infringing content appears on a platform, it is likely that the platform will be deemed to have knowledge regarding the existence of such content and thus be held liable. Particularly, law enforcement agencies are prone to fall into ‘results-oriented’ reasoning by presuming that ISPs failed to fulfil monitoring obligations.
Overall, the regulation of content moderation serves as a ‘policy lever’ used by public authorities to obtain control over the big tech powerhouses. At the same time, platforms are vested with a potent power, which has substantially mitigated not only illicit but also ‘lawful but awful’ online content to a large extent. However, this has accelerated the fragmentation of online law enforcement and generated the need for algorithmic recommendation and filtering systems. In the long run, excessively vague rules, inconsistent enforcement, paired with excessive reliance on algorithms will render the expansive collateral censorship of online content an inevitable failure, since it burdens ISPs with significant compliance costs and impacts freedom of expression, access to information and media pluralism at large.
The paper ‘Making the private public: Regulating content moderation under Chinese law’ was published in the Computer Law & Security Review.Baiyang Xiao is a PhD Candidate from University of Szeged, Institute of Comparative Law and Legal Theory. He is also a scholarship holder at the Max Planck Institute for Innovation and Competition. His main research interest is copyright law, intermediary liability, and AI governance in comparative perspectives.
E.g. (2004)苏中民三初字第098号民事判决书; (2008)穗中法民三终字第119号民事判决书 ↩︎
E.g. (2021)京73民终220号民事判决书; (2019)京0491民初16240号民事判决书 ↩︎
Weng Jieming is the Vice-Chairman of China’s State-owned Assets Supervision and Administration Commission (SASAC), the institution overseeing the 97 companies owned by China’s central government. “World Economic Forum Annual Meeting” by World Economic Forum is licensed under CC BY-NC-SA 2.0.
Since the turn of the 21st century, China has experienced a tremendous economic rise and made significant progress in transitioning to a market economy. State-owned enterprise (SOE) reforms commenced in 1978, however, the country is still home to more than 300,000 SOEs that continue to play a dominant role in the national economy. China’s chronically large state economy prompts the question: What is the current plan of the Chinese government for the country’s state-owned economy? This paper examines the design of the latest SOE reform policies in light of their historical development to find answers, thereby laying some groundwork for understanding Chinese SOEs’ increasing engagement in international commercial activities.
To some extent, China’s Constitution provides clarification: it reads that ‘the state shall uphold a fundamental economic system under which public ownership is the mainstay’ (Article 6) and ‘the state economy shall be the leading force in the national economy’ (Article 7). The state economy’s primacy in China’s national economy is also enshrined in the Chinese Communist Party (CCP) ideology and has been stressed consistently by its leaders—In 2020, President Xi publicly reiterated the paramount significance of SOEs, describing them as the economic and political foundation that support China’s socialist political regime. Accordingly, in practice, Chinese SOEs have played an important role as the primary implementors of government directives and national policies in support of China’s social stability and strategic development, as evidenced by their policy-driven contributions to overcome the COVID-19 pandemic.
Given the entrenched ideological, statutory, and practical significance of SOEs in China’s political-economic system, it is implausible that China pursued or pursues genuine privatisation of its state economy. A first privatisation move, in the second round of SOE reforms (1993-2002), consisted of the ‘Grasp the Large and Release the Small’ programme. It was promoted in the context of the Chinese state economy’s overall desperation caused by SOEs’ disastrous performance in market competition following the 1978 Reform and Opening up. The essence of the programme can be summarised as partial marketisation—preserving the critical industries (i.e., industries essential for national growth and social stability) for continued monopolisation by SOEs and allowing various ownership forms and the privatisation of SOEs that lost grounds to non-state competitors. The programme nearly halved the number of Chinese SOEs and significantly contributed to the general resurgence of China’s state sector around 2008. Substantially, it strengthened rather than weaken China’s state economy and reshaped China’s state economy landscape into a dichotomous system, in which SOEs monopolise in critical industries and compete with non-state firms in others.
Upon assuming the presidency in 2012, President Xi Jinping launched the fourth round of SOE reforms, declaring that China would continue and enhance its reliance on the state economy to advance national development. As a result, the latest round of SOE reforms has continued the core thinking of ‘Grasp the Large and Release the Small’, albeit with a varied policy tailored to the altered foreign and domestic situations, such as the rising Sino-Western tensions and the severe production overcapacity in heavy industries.
The ongoing reform to restructure the state economy consists of massive government-orchestrated mergers between SOEs at the central level (i.e., SOEs owned and supervised by the central government), while preserving critical industries for State-sanctioned SOE monopolies. Simultaneously, the Chinese government has put forth a series of specialised slim-down programmes primarily targeting unprofitable SOEs and SOEs operating in non-critical industries. These programmes aim to boost overall operational efficiency of the state economy and foster robust competition among all forms of ownership in the non-critical industries.
The restructuring reform has proven fruitful: the ‘Grasp the Large’ merger strategy has created 20 world champions in critical industries, including China Baowu Steel Group and China Minmetals Group (ranked 44th and 65th in the 2023 Fortune Global 500, respectively). The strategy has also helped the Chinese government get rid of 14,000 undesired SOEs and enhance the overall financial performance of state economy. However, in the context of the rising Sino-western geopolitical tensions and the Xi Jinping administration’s assertive foreign policies, China’s efforts to reform its state economy following the ‘Grasp the Large and Release the Small’ highlight the likelihood that the reform would facilitate Beijing’s centralised control over a handful of SOE monopolies. This might further existing scepticism that Chinese major SOEs’ international commercial activities serve policy objectives rather than purely commercial goals. This scepticism may hinder the legitimate overseas expansion of Chinese SOEs through, for instance, the enhanced inbound foreign investment screening mechanisms that most developed countries have adopted. This could also make it more difficult for China to normalise relations with old-day economic partners like the UK, EU and Australia.
The working paper “The Latest Round of China’s State-owned Enterprise Reforms: Grasping the Large and Releasing the Small?” can be accessed here.
Tianqi Gu is a PhD candidate at the Sydney Law School. She holds a Bachelor of Laws from Dalian Maritime University (China), a Master of Laws (LL.M) in International Commercial Law from University College London, and a second LL.M from the University of Sydney. Tianqi is the holder of Australian Government Research Training Program Scholarship and Chinese National Scholarship. Her research focuses on Chinese SOE investments in Australia in the context of China’s SOE reforms and Australia’s foreign investment review framework and international investment law. Tianqi Gu can be reached at Tianqi.gu@sydney.edu.au.
