The cornerstones of China’s Fintech Regulation

17. September 2021
A new book by Robin Hui Huang
Mobile payment on a farmers’ market

Financial technology (Fintech) brings about paradigm changes to the traditional financial system, presenting both challenges and opportunities. In 2020 when this book was largely written, unlike many traditional businesses, Fintech seemed to be accelerated rather than hampered by the outbreak of the COVID-19 pandemic. Due to the various restrictions and even lockdowns imposed during the pandemic, more people and institutions have embraced Fintech, doing shopping, payment, and investment through online platforms. In any event, Fintech looks set to reshape the financial landscape, producing significant impact on the business community and society at large.

This is the first book-length treatment of the regulation of Fintech in China. At the international level, there has been a fierce competition for the coveted title of global Fintech hub. One of the key enablers of success in this race is regulation. As the world’s leader in Fintech, China’s regulatory experience is of both academic and practical significance. This book aims to present a systematic and contextualized account of China’s Fintech regulation, identify relevant institutional factors contributing to the development of the Chinese law, and illustrate why and how China’s Fintech regulation has been developed, if and how it differs from the rest of the world, and what can be learned from the Chinese experience.

Fintech is an evolving concept with new products or services emerging constantly. Hence, it seems neither desirable nor feasible to discuss all Fintech sectors in this book, and it would be necessary to be selective about the topics to be covered. This book chooses to focus on the following topics: online P2P lending, cryptoassets, initial coin offerings, mobile payments, data protection, robo-advisory, equity crowdfunding and central bank digital currency. In fact, China has both stories of success (e.g., mobile payments) and lessons of failure (e.g., online P2P lending).

Although different sectors of the Fintech market have different features and issues, this book shows some common threads running through them. First and foremost, the regulatory goal is to achieve two main objectives, namely facilitating financial innovation and market development on the one hand, while ensuring risk control and investor protection on the other. Second, the regulatory balance is a delicate and dynamic one, which needs to be carefully designed and adjusted according to the local conditions of any given jurisdiction. Third, the regulatory regime for the Fintech markets is a work-in-progress, which is not surprising given the fast-changing pace of the underlying Fintech markets.  

Given the novel and disruptive nature of Fintech, a fundamental question here is whether we can still use the traditional regulatory framework for Fintech, or we need to think outside the box and introduce a new one specifically for Fintech? Indeed, Fintech regulation presents a cutting-edge and largely uncharted territory, and the right key can be found only after lots of trial and error.

From a political-economic perspective, this book also ventures to demonstrate the Chinese characteristics of China’s Fintech regulation. For instance, it does not only examine the substantive rules, but also the enforcement issues, particularly the interest group politics of relevant regulators. At a higher level, China’s Fintech market can be labelled “policy market” in that the development and regulation of China’s Fintech markets have been heavily influenced by the policies of the government (or even the Chinese Communist Party). Data privacy and cybersecurity have become increasingly important in the regulation of China’s Fintech business, with far-reaching implications for the financial markets domestically and internationally (via overseas-listed Chinese Fintech firms). There can be more uncertainty arising from these issues due to China’s growing concerns over national security against the background of the ongoing competition (confrontation) between China and the US.

In sum, the Chinese experience can have important implications for the international discourse and debate on the regulation of Fintech. This book has several features which readers may find useful as a source of information. Firstly, a systematic and contextualized account of China’s Fintech regulation helps readers gain a holistic view of the regulatory approach and regulatory perimeter in China. Secondly, the book tries to identify and analyze factors the interaction of which has contributed to the constitution of the institutional environment in which China’s regulation of Fintech has been made and enforced. This will help readers understand not only what the law is, but also why the law is the way that it is. Thirdly, it takes a comparative approach to critically evaluate Fintech regulation in China. The comparative analysis covers some major Fintech jurisdictions in the region and internationally, such as the US, the UK, Singapore and Hong Kong.

Robin Hui Huang’s book, Fintech Regulation in China: Principles, Policies and Practices was published with Cambridge University Press and is available here.

Robin Hui Huang is Professor (senior level) at the Faculty of Law, Chinese University of Hong Kong. He is a leading expert in corporate and financial law with a focus on Chinese and comparative issues. He is also Adjunct Professor of Law at the University of New South Wales, Li Ka Shing Visiting Professor of Law at McGill University, Honorary Professor at East China University of Political Science and Law, and Guest Professor at China University of Political Science and Law. He is Specially-Invited Research Fellow of the Supreme People’s Court of PRC and Expert Advisor of Shanghai Financial Court. He has had about 120 publications, including 10 books and many papers in premier publishing houses and top journals in the United States, United Kingdom, Australia, Canada, Germany, Israel, Hong Kong, Mainland China, and elsewhere. He acts as a Chinese law expert in international litigations and serves as an arbitrator in China and overseas. 

Chinese Courts and Criminal Procedure – Q&A about the new book with editor Björn Ahl

8. September 2021

Chinese Courts and Criminal Procedure – Post 2013 Reforms was published this year with Cambridge University Press

The Xi’An Intermediate People’s Court
  1. In a nutshell: With its observations of a range of topics, what does this book tell us about the trajectory of criminal justice in China?

One of the main achievements of the book is to bring together contributions that look at Chinese court reforms and criminal procedure law reforms. Moreover, the book combines a wide range of analytical perspectives and themes in order to investigate questions that link institutional changes within the court system and legal environment with developments in criminal procedure law. The common denominator in the broad array of topics discussed in this volume is the multitude of forces attempting to influence the trajectory of judicial reform and criminal justice in China. The complex dynamics, and particular interests, of the numerous agents and subjects involved in the process intermingle with any undertaking to effective systemic change in the Chinese judiciary. These dynamics may play out in different ways. They may, for example, be mutually reinforcing, as in the case of the intra-court personnel reforms, heightened transparency, resilience against media influence and reform of the adjudication committees, all of which may result, to use the words of Fu Yulin, the author of chapter 2 of the book, in the by-product of a more independent judiciary. However, parallel reform projects can also interfere with one another, impeding the intended effects of each, as evidenced by the difficult position of the procuratorates in the criminal justice reforms, given that the envisioned trial-centred proceedings mandate the more prolific and active use of live witness testimony.

  1. Judicial Reform is an ongoing endeavour since reform and opening. (How) has the direction changed under the Xi Jinping administration?

Due to far-reaching limitations of civil and political rights, increased repression of political dissent and mass internment in Xinjiang, legal developments in the Xi Jinping era are generally perceived outside China as subject to unrestricted authoritarian rule that has largely side-lined legal institutions, including the Chinese courts. However, the court reforms of the post-2013 period have provided judges and courts with more autonomy in the adjudication of cases. Under Xi Jinping, court reforms have returned to the idea of rule-based governance, brought the court system back to the centre of dispute resolution, and emphasised professionalism, autonomous decision-making, the transparency and accountability of judges, and centralisation of the judiciary. The Decision on Governing the Country According to Law of the 4th Plenum, attempts at the normative regulation of inner-party affairs by strengthening rule-based governance and the October 2018 amendment of the People’s Court Organisation Law all underscore the regime’s efforts to formalise legal procedures and strengthen legality. Court reforms have taken a more radical turn than those passed under preceding administrations, as a vast range of measures have been introduced to render judges and the courts less susceptible to local government interference and increase the efficiency of the judiciary. The strengthening of the courts as professional, autonomous arbitrators of legal disputes was effected through both a centralised judicial authority and controlled experimental reform measures at the local level.    

  1. Xi Jinping’s leadership has amended the Constitution three years back, among others lifting the term limits for his own rule. Among the changes made, which are most consequential for criminal procedure in China?

Apart from abolishing the term limits of the state president, the 2018 constitutional amendment established the National Supervision Commission as a new state organ that merged the anti-corruption agencies of the party and the state. Supervision commissions were also introduced at the local levels. The National Supervision Commission has now been afforded an independent constitutional status that allows it to exercise both administrative and criminal supervisory powers in supervising, investigating, disciplining and sanctioning public officials. Rather than constituting an independent state institution, the supervision commissions have absorbed state functions that are now directly controlled by Party disciplinary inspection commissions at the various administrative levels, the members of which simultaneously hold positions in the state’s supervision commissions. The supervision commissions are not subject to the legal constraints on investigative powers stipulated in the Criminal Procedure Law, although they enjoy de facto power to conduct criminal investigations and gather evidence that is admissible in criminal trials. The Supervision Law’s coverage has been extended to all public employees who exercise public power rather than being restricted to Party members alone, as under the previous scope of investigation by the disciplinary inspection commissions. Meng Ye in chapter 5 of the book provides an in-depth analysis of the supervision commissions.

  1. The volume zooms in on a number of themes in the reform of criminal procedure. What do the observations have to offer in response to the claim that the rule of law is a lost cause in China?

The answer to this question depends on how you define the rule of law. If we take the term in its liberal sense and require that the law effectively constrains all levels of government and comprehensively controls the political process, then the overall direction of procedural and institutional reforms during the post-2013 era is disappointing. In general, the dominance of the party over the law has been re-emphasised on the ideological and institutional levels. It is stressed that the effectiveness of the law hinges on permanent affirmation and supervision by the party. The reforms do not directly aim at improving the protection of rights of the individuals involved in criminal procedures. However, improvements in terms of the protection of rights may occur as by-products of some reform measures. Many court reforms are part of a general centralisation dynamic and aim at insulating courts from improper horizontal influence of local actors, while strengthening vertical control over the court system. What this change from ‘improper influence’ to ‘proper influence’ means for the development of a ‘socialist rule of law’ is difficult to measure. The court and criminal procedure law reforms are oriented towards unified application of the law, they rely on technology and data-driven innovations that reduce human discretion, they have enhanced professionalisation, transparency and vertical control of courts as well as given individual judges and panels of judges greater autonomy in adjudication. However, criminal procedure reforms aim at enhancing Party-state governance effectively control crime and political dissent in order to maintain Party supremacy and social stability. To sum up, the reforms have strengthened the instrumentalist aspects of law and formal legality but not necessarily due process or human rights protection.

  1. How can the role of the Supreme People’s Court be described in criminal procedure developments?

This issue is addressed in detail by Susan Finder in her chapter on how the SPC adopts judicial interpretations of the criminal procedure law. The SPC is the most important institutional actor linking court reform and criminal procedure reform, with the dynamics of both grounded in the administrative and legislative functions of the SPC. Those functions are distinct characteristics of China’s highest court that are not shared by the apex courts of other jurisdictions. Although the SPC has an important adjudicative function as an appeal court, its legislative function has elevated it to the role of a legislator. The SPC wields these powers through judicial interpretations that are often more relevant to adjudicative practice in procedural law than the laws passed by the NPC or its Standing Committee. Further, the SPC exercises administrative powers over the entire court system, including the design and implementation of court reforms in cooperation with the relevant party organs. The SPC’s judicial interpretation drafting process is an example of secluded, bureaucratic law-making in which the political interests of the CPC and the institutional interests of the SPC and the judiciary as a whole dominate.

  1. What are other actors exerting influence in the development of criminal justice and courts in China? 

The book focuses on the Supreme People’s Court as a major actor of initiating and implementing institutional and procedural reforms. Yet we should not underestimate the role of the academia in the development of criminal procedure law and court reforms. Many of the reform measures were proposed by legal scholars and have been discussed for some time before they were taken up by the party-state leadership. Of course, legal scholars have no power to determine reform priorities or to take decisions about what kind of reform models shall be adopted, but Chinese legal scholarship is the most important intellectual resource from which decisionmakers draw.

  1. Developments in Chinese law have been informed by systems and laws in other countries. Does criminal procedure reform look to other countries for reference?

All major Chinese legal reforms in the last decades were preceded by comparative studies of legislation, scholarship and judicial practice of foreign jurisdictions. Apart from foreign jurisdictions, international human rights treaties that set standards for criminal trials have been a central reference point of academic discussions. However, nowadays debates about foreign legal models and their suitability for China only take place in the background. In contrast to earlier periods of the reform and opening period, official documents refrain from references to foreign or international law and place the indigenous Chinese experience at the centre. The widespread use of the terms ‘Chinese characteristics’ and ‘selective adaptation’ of foreign models indicate legal reform relies on indigenous resources and technology and data-driven innovations rather than on the adoption of ‘Western’ law. Indeed, Chinese legal institutions and procedural laws are quite distinct from those of liberal rule of law systems as the Chinese authoritarian system has certain features that determine the shape and operation of legal institutions and the law. For example, the supremacy of the Communist Party requires channels of ‘proper interference’ with judicial decision-making processes in order to effectuate its comprehensive overview of the implementation of law.     

Contributors to the volume ‘Chinese Courts and Criminal Procedure‘, published with Cambridge University Press, include Xiaohong Yu, Yulin Fu, Susan Finder, Ye Meng, Alexandra Kaiser, Zhiyuan Guo, Kwai Hang Ng, Xin He, Michelle Miao, and Daniel Sprick. The editor Björn Ahl is Professor and Chair of Chinese Legal Culture, Cologne University and President of the European China Law Studies Association.

China’s multinationals and their US lawyers

16. August 2021
A new paper by Ji Li

Chinese multinational companies (MNCs), key agents in China’s global expansion, have caught considerable attention as the US-China rivalry escalates. Top Chinese MNCs such as Huawei, ByteDance, and Xiaomi face unprecedented political, regulatory, and legal risks in the United States, which, if poorly managed, pose existential threat. Are Chinese MNCs capable of negotiating the risks? The answer is certainly no if the MNC managers, most of whom lack basic understanding of U.S. law, do not delegate extensively to legal professionals. In other words, U.S. lawyers play an indispensable role in helping Chinese MNCs navigate the increasingly complex and hostile U.S. legal and regulatory landscape. Yet little is known about how Chinese MNCs interact with their outside counsel, as the existing literature on corporate consumption of legal services has largely neglected developing country MNCs. Ji Li addresses Chinese MNCs’ in-house legal counsels in the United States in his article “Going Out” and Going In-House: Chinese Multinationals’ Internal Legal Capacity in the United States.  

Li empirically explores several major aspects of Chinese MNCs as consumers in the U.S. legal market. Do they take professional legal advice seriously? The qualitative evidence (i.e., interviews with lawyers, in-house counsel, and other business professionals) tells a mixed story. While some view Chinese MNCs as not notably different from U.S. companies, others complain about habitual disrespect for lawyers and under-appreciation of the importance of quality legal services for running business in the United States. However, the quantitative evidence (i.e., data based on a comprehensive survey of Chinese MNCs in the United States) indicates that, on balance, Chinese investors recognize U.S. legal services as being costly but essential for their U.S. operations.

That said, in a market of 1.3 million registered U.S. lawyers, most of whom are self-claimed “leading experts” in their respective practice areas, how do Chinese MNC managers without U.S. legal expertise collect accurate and truthful lawyer information? The study reveals that Chinese managers surmount severe information asymmetry by relying primarily on trusted and knowledgeable third parties for U.S. lawyer recommendations (for more about Chinese MNCs’ lawyer selection preferences, see “What Do Chinese Clients Want?”). Additionally, the study finds that most Chinese MNCs spend relatively insignificant amounts of money on U.S. legal services, leaving them with minimal bargaining power vis-à-vis their legal service providers. It is therefore not uncommon for top U.S. firms to treat Chinese MNCs as “second class clients.”  

Obviously, all Chinese MNCs are not the same, and their U.S. legal expenses vary significantly. Huawei and ByteDance probably spend millions of dollars a year purchasing U.S. legal services, whereas many report annual legal budgets of less than a hundred thousand dollars. What explains the inter-company variations? For instance, all else being equal, do state-owned Chinese MNC spend more on U.S. lawyers? After all, “it’s not their own money,” noted a knowledgeable informant. The study finds that the U.S. legal expenses of Chinese MNCs vary according to their legal service demand, not special corporate attributes such as ownership structure, which Li argues is another sign that Chinese MNCs have limited impact on the U.S. legal market due to their lack of leverage. The findings of this study contribute to ongoing debates about Chinese MNCs, their adaptation to host country institutions, and their impacts on the legal profession and the global legal service market. 

Ji Li’s paper “Meeting Law’s Demand: Chinese Multinationals as Consumers of U.S. Legal Services” was published in Yale Journal of International Law online and is available for free here.

Ji Li (jli[at]law.uci.edu) is John S. and Marilyn Long Professor of U.S.-China Business and Law at UC Irvine School of Law. His book, Clash of Capitalisms: Chinese Companies in the United States (Cambridge University Press, 2018), examines the adaptation of Chinese investors to the U.S. legal and regulatory system. His other publications can be downloaded here.

Göttingen Summer School on Chinese Law

11. August 2021

September 20-24, 2021

creativecommons.org

The “Göttingen Summer School on Chinese Law” of will take place in the week of September 20-24, 2021 in a digital format. The event, organized by the SinoGerman Institute for Legal Studies of the Georg-August University of Göttingen in cooperation with the Max Planck Institute for Comparative and International Private Law Hamburg, is aimed at students, doctoral candidates and practitioners who want to gain an initial insight into Chinese law or who want to deepen their knowledge in this field. The focus is on the professional exchange on current developments in Chinese law and legal practice in China. As we welcome an international audience, the event will be held in English.
The main component of the summer school is a daily basic lecture “Chinese Business Law” by Professor Dr. Knut Benjamin Pißler, China consultant at the Max Planck Institute. In addition, academics and experts will give lectures on various selected topics of Chinese law. Find the full program here.

This year, the Institute is particularly pleased to offer lectures by Professor Donald Clarke (The George Washington University Law School), Professor Dr. Yuanshi Bu (University of Freiburg) and Professor Dr. Eva Pils (Dickson Poon School of Law, King’s College London). For an overview of all speakers, click here. By passing the take-home examination, law students can acquire their foreign language certificate according to § 4 I No. 1 d NJAG.

As the number of participants is limited to 80 people, we ask that you register early.

For further information and if you have any questions, visit our website and please do not hesitate to contact Susanne Jonetzko and her team by phone (+49 551 3921820) or email (ChinaRecht@jura.unigoettingen.de).

Which rules apply? Determining China’s responsibility for the Covid-19 pandemic in public international law

6. August 2021
A new paper by Daniel Laprès
Wikimedia Commons

On December 31, 2019, the Wuhan Municipal Health Commission posted a notice on its website about an outbreak of a viral pneumonia outbreak in the city. By July 27, 2021, almost 200 million people across the world were known to have been infected and more than four million had died. The COVID-19 pandemic’s global cost, as estimated in October 2020 by the International Monetary Fund, could reach 28 trillion US dollars over the next five years.

Are there grounds in law to impute state responsibility on China for its role in the spread of the pandemic, and is there evidence for such claims? This paper (available here) focuses on the first question, namely on the framework in public international law governing state responsibility in relation with epidemics.

Under public international law, every internationally wrongful act of a state entails its international responsibility.[1] Such wrongful acts include, among others, violations of general principles of public international law and violations of obligations specifically undertaken vis-à-vis other states. A defendant state may invoke as an excuse for failures to perform any of such obligations the defense of force majeure subject to the satisfaction of certain conditions. Victim states assume responsibility for their own conduct that aggravates harm caused illegally by another state.

General principles of public international law

It has been established that states have a general obligation to ensure that activities within their jurisdiction and control respect the environment of other states.[2] However, there can be no responsibility for a pure act of nature, such as a flood caused by rainfall. An epidemic outbreak of a dangerous disease is generally recognised as such an act of nature, so that a state where one broke out would not be liable on that account alone for its propagation internationally.

On the other hand, although there can be no responsibility for a pure act of nature, as soon as human action or inaction is involved, the problem of responsibility arises. Consequently a flood caused by the breach of a dam, itself caused by heavy rainfall, begs the question to what extent the dam’s construction or operations were catalysts of its breach.[3]

creativecommons.org

China’s obligations under treaties

China might also be held liable for violations of its obligations subscribed under treaties, in this case, most relevantly the International Health Regulations (IHR) adopted under the aegis of the World Health Organization (WHO) by 196 states.[4] The currently applicable IHR, adopted in 2005, entered into effect on June 17, 2007 in the aftermath of the severe acute respiratory syndrome (SARS) outbreak.

According to its Article 2, the member states retain “the sovereign right to legislate and to implement legislation in pursuance of their health policies”, so the WHO has very little power to impose its desiderata on any recalcitrant member state. For instance, Indonesia refused to share samples of influenza A (H5N1) with the WHO. The country invoked its sovereign right to control matters connected to the outbreak of the disease on its territory as it was concerned that it might not receive a fair share of the benefits of scientific discoveries derived from the virus samples.

The Regulations further stipulate that each member state undertakes to “develop, strengthen and maintain . . . the capacity to detect, assess, notify and report events” as required and that they must notify the WHO within 24 hours of all events which may constitute a public health risk to other states through the international spread of disease and which may require a coordinated international response. When requested by the WHO, member states “should provide, to the extent possible, support to WHO-coordinated response activities”.

If a member state of the WHO were to engage its responsibility in connection with its commitments within the WHO, then it could be pursued by other member states in accordance with the WHO dispute resolution procedures. However, the WHO itself, in its report on its investigative mission to China published in February 2020, has declared that

'In the face of a previously unknown virus, China has rolled out perhaps the most ambitious, agile and aggressive disease containment effort in history. The strategy that underpinned this containment effort was initially a national approach that promoted universal temperature monitoring, masking, and hand washing. However, as the outbreak evolved, and knowledge was gained, a science and risk-based approach was taken to tailor implementation. Specific containment measures were adjusted to the provincial, county and even community context, the capacity of the setting, and the nature of novel coronavirus transmission there.'[5] 

In addition, member states retain the right to refer any dispute about the IHR to the International Court of Justice, provided that each had submitted to its jurisdiction without filing any reservations with respect to the subject matter of the dispute in question; China has not filed any such declarations.

The defense of force majeure

In the event of a claim brought against China for violations of any of its treaty obligations, it could invoke force majeure as a defense. For an event to justify the invocation of force majeure in public international law, a state must demonstrate a link of causality between the event and its failure to fulfil the obligation[6] from which the State claims to be excused[7] and additionally that the event is ”irresistible”, “unforeseeable”, and “external to the party invoking it”.

In short, a State would not be held responsible in public international for the occurrence of an epidemic as an act of nature, but its policies, acts and omissions in its prevention, and management of its propagation, in particular toward foreign countries, could engage its responsibility. If it were established that a Chinese state agency, such as the Wuhan Institute of Virology (WIV),[8] willingly or negligently introduced COVID-19 into circulation, then the defence of force majeure would not be available since its acts would be clearly within the control of the Chinese State, i.e. not “external”.

On the consequences of contributory negligence

Contributory negligence by the injured party is also held to extinguish the total or partial liability of the operator or the acting state in some multilateral conventions.[9] Contributions to the injury by willful or negligent action or omission of the injured state must be taken into account in determining any due reparations. According to the John Hopkins Corona Virus Resource Center, as of July 27, 2021, in the United States there had been about 126 times more deaths per capita due to COVID-19 than in China, and that is before considering that China’s population is four times larger.[10]

Whatever China’s liability to other countries stricken by the pandemic for its violations of its international obligations might be, the liability to repair the ensuing harm would be reduced, or even entirely offset, to the extent that other states had failed to adopt appropriate and timely measures to prevent and mitigate the harm caused by the pandemic within each of their territories.

Events surrounding the COVID-19 pandemic have demonstrated the limits of the current law to regulate international health. To carry out any missions on the territory of a member state, the WHO must obtain the latter’s consent, which can be withheld at its unqualified discretion for the protection of its sovereignty. A more constraining framework could be adopted by the member states.

Find Daniel A. Laprès’ paper ‘The framework in public international law for determining the responsibility of the People’s Republic of China in connection with the Covid-19 pandemic‘, published in the International Business Law Journal, here. He was Senior Counsel at the Kunlun Law Firm, Beijing from 2008-2019, counsel at the Court of Appeals of Paris, Barrister and Solicitor in Nova Scotia, and an arbitrator on the International List of the China International Economic and Trade Arbitration Commission (CIETAC). He authored numerous publications Chinese law, a list of which may be found on his website.


[1] Article 1 of the International Law Commission (ILC) Draft articles on Responsibility of States for Internationally Wrongful Acts, with commentaries, 2001, https://legal.un.org/ilc/texts/instruments/english/commentaries/9_6_2001.pdf; and the following cases: Phosphates in Morocco, Judgment, 1938, P.C.I.J., Series A/B, No. 74, p. 10, at p. 28. See also S.S. “Wimbledon”, 1923, P.C.I.J., Series A, No. 1, p. 15, at p. 30; Factory at Chorzow, Jurisdiction, Judgment No. 8, 1927, P.C.I.J., Series A, No. 9, p. 21; and Merits, Judgment No. 13, 1928, P.C.I.J., Series A, No. 17, p. 29.

[2] Certain activities carried out by Nicaragua in the Border Area (Costa Rica v Nicaragua, and Certain activities carried out by Costa Rica in the Border Area (Nicaragua v Costa Rica), December 16, 2015, https://www.icj-cij.org/files/case-related/152/152-20151216-JUD-01-00-EN.pdf; the passage cited is extracted from the ICJ’s order in this case rendered on December 123, 2013 at para. 19.

[3] P. Reuter, Droit international public, 4th ed., Paris, Presses universitaires de France, coll. Thémis, 1973, p. 115.

[4] Other commitments meriting consideration, though in the end not likely applicable, are those undertaken under articles 55 and 56 of the United Nations Charter, under article 12 of the International Covenant on Economic, Social, and Cultural Rights, as well as under the UN Convention concerning the Protection of the World Cultural and Natural Heritage of 1972 the UN Convention on Biological Diversity of 1992 and the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES).

[5] Report of the WHO-China Joint Mission on Coronavirus Disease 2019 (COVID-19), February 16-24, 2020, p. 14, https://www.who.int/docs/default-source/coronaviruse/who-china-joint-mission-on-covid-19-final-report.pdf, p. 16. A detailed account of China’s policies and actions to combat COVID-129 may be seen at Institute of Contemporary China Studies Tsinghua University, China’s Fight against COVID-19, April 21, 2020, https://covid-19.chinadaily.com.cn/a/202004/21/WS5e9e2c62a3105d50a3d17880.html.

[6] The international obligation may arise from any “source” of public international law, such as a treaty, a custom, a general principle, a unilateral act, a decision of an international governmental organization, a judgement of the ICJ, an award of an arbitration tribunal. P. Reuter, Droit international public, 4th ed., Paris, Presses universitaires de France, coll. Thémis, 1973, p. 115.

[7] B. Cheng, General Principles of Law as Applied by International Courts and Tribunals, London, Stevens, 1953, p. 228, citing the Permanent Court of International Justice in the cases of the Serbian Loans and the Brazilian Loans (1929), and the rapporteur in the Spanish Zone of Morocco Claims (1924-1925).

[8] The Institute was founded in 1956, and put under the administration of the Hubei Commission of Science & Technology in 1970.  In June 1978, it was returned to the jurisdiction of the Chinese Academy of Sciences, and it adopted its current title

[9] International Liability for Injurious Consequences arising out of acts not prohibited by International Law, International Liability in case of loss from transboundary harm arising out of hazardous activities, (Agenda Item 4) Document 1/CN 4/543, N° 446.

[10] In the United States : 611,151 deaths among a population of 333,071,970 compared with China’s loss of 4,848 for a total population of 1,444,586,267, https://coronavirus.jhu.edu/map.html.

On Global Constitutionalism and the Community of Common Destiny for Mankind

29. July 2021
A new paper by Björn Ahl
Ministry of Foreign Affairs, Beijing Wikimedia Commons

China is stepping up its ambitions to become a norm-making power and its capability to achieve this has become a key question in the debate over the international order. In the realm of international law, the government of the People’s Republic has put forward the concept of a ‘community of common destiny for mankind’ which stresses some long-standing norms of global constitutionalism, neglects others and further introduces new ones to the field.

In order to better delineate China’s plans for international law and to identify the values and structures of the future international legal order envisaged by China, Björn Ahl in his latest paper observed both Chinese legal scholarly debates and government statements revolving around the community of common destiny for mankind as well as global constitutionalism and its substantive ingredients: jus cogens, human rights, democracy and the rule of law. Whereas the public debate by no means embodies the full picture of the direction where the PRC’s take on international law is heading towards, it does reveal which elements are accepted and which are rejected.

Although part of that scholarship affirms in general terms the value of the rule of law, human rights and democracy, those who discuss the substantive elements of global constitutionalism in more detail often give them distinctly different interpretations or even refute them.

The Chinese debate on global constitutionalism began with China’s accession to the WTO in 2000. While generally supporting the interpretation of international law in constitutionalist terms, many scholars also point out the dominance of Western viewpoints and call to better align international law with Chinese interests. For instance, peremptory norms of international law (jus cogens), are regarded as one constitutive element of global constitutionalism, however official statements show a very narrow reading of it that is not in line with the scholarly understanding that jus cogens norms have universal binding force and a higher status than ordinary norms of international law.[1] Ahl explains that jus cogens norms as norms imposed on states without their consent empower non-state actors, domestic courts and international tribunals, and are thus not conducive to furthering the interests of authoritarian states like the PRC which seek effective control over the judiciary and civil society.

The rule of law was first officially introduced to the PRC Constitution in 1999 with a significant twist: ‘Socialist rule of law’ emphasizes the supremacy of the party over the law and denies full legal autonomy, features that make it difficult to apply it to the realm of international law. The official debate around the rule of law in China defends the instrumentalist ‘socialist rule of law’ as a legitimate local variation of the international rule of law.

Socialist rule of law is an ideological rather than legal concept, the meaning of which is not determined and/or fleshed out by legislation and the courts but by party documents. […] The concept is a variation of the principle of socialist legality, where stability and flexibility are combined within a dialectical relationship.

A general trend towards democratisation in international law has been widely acknowledged by Chinese authors in the sense of a power shift away from US dominance. They have also claimed that the dominant notion of democracy as well human rights is limited and advocates Western ideology. One strand of arguments projects the Chinese development model onto the global arena, holding that top-down considerations can better serve developmental goals than antagonistic and individualistic rights-based approaches. Through stating that it “offers Chinese wisdom and solutions for global governance of human rights”[2], the government makes it clear that it works towards disseminating its own official human rights approach in order to bring international human rights standards in line with domestic practices.

The concept of the community of common destiny for mankind is in the scholarly discourse at hand regarded as a precondition for recognising a hierarchy of norms in international law. Scholars argue that the community of common destiny concept contains a set of binding principles of international law. Ahl’s paper dives into official and scholarly takes on these principles: for instance is the very prerequisite for the principle ‘durable peace’ found to be sovereign equality including a free choice of political system and development path. The principle ‘universal security’ is regarded to also cover the political risks to authoritarian systems.

The community of common destiny is seen as a new source of legitimacy for international law that is based on the shared interests of the community of states.

He concludes that the reinforcement of the existing order and fundamental change to that order are both components of the community of common destiny concept. Whereas formal aspects of global constitutionalism overall are viewed favourably, it is also criticized as turning a blind eye to US dominance.

Find Björn Ahl‘s full paper ‘Chinese Positions on Global Constitutionalism, Community of Common Destiny for Mankind and the Future of International Law’, forthcoming in the Chinese Journal of Comparative Law, on SSRN here.

Björn Ahl is Professor and Chair of Cologne University’s Chinese Legal Culture. Before joining the University of Cologne in 2012, he was Visiting Professor of Chinese Law, Comparative Public Law and International Law in the China EU School of Law at the Chinese University of Political Science and Law in Beijing. Prior to that he held a position as Assistant Professor of Law in the City University of Hong Kong. He has also worked as Associate Director and Lecturer in the Sino German Institute of Legal Studies of Nanjing University and as a Researcher at the Max Planck Institute of Comparative Public Law and International Law in Heidelberg. Find him on LinkedIn.


[1] Permanent Mission of the PRC to the UN, ‘Statement by Mr. XU Hong, Director General of the Department of Treaty and Law, Ministry of Foreign Affairs, People’s Republic of China at the 71st Session of the UN General Assembly on Agenda Item 78, Report of the International Law Commission on the work of its sixty-eighth session (Part II: Chapters 7, 8, 9, 10, 11, 12)’ (chnun.chinamission.org, 27 October 2016) last accessed 18 July 2021

[2] State Council Information Office, ‘Seeking Happiness for People: 70 Years of Progress on Human Rights in China’ (gov.cn 22 September 2019 last accessed 18 July 2021.

Archipelagos of Chinese Law

25. June 2021
A new paper by Matthew Erie
Dahlak Archipelago (Wikimedia Commons)

On May 20, 2021, the Sri Lankan government passed the controversial Colombo Port City Economic Zone Bill (Port City Bill), creating the country’s first special economic zone (SEZ) for services-oriented industries. Parliament’s passing of the bill occurred days after the Supreme Court ruled that several provisions of the Port City Bill were unconstitutional, requiring amendments. The heart of the controversy was the creation of a commission of unelected members who would have broad powers over the SEZ, an innovation that contravened the authority of regulators and, as it has been argued, violated Sri Lankan sovereignty as enshrined in its constitution. More specifically, the SEZ is funded and developed by a subsidiary of China Communications Construction Company, which invested $1.4 billion to construct the SEZ in exchange for a 99-year lease from the Sri Lankan government. As a result of this controversy, the Port City Bill was amended such that five of the seven commission members have to be Sri Lankan.

Unaddressed by the Supreme Court, however, was a seemingly more innocuous but nonetheless potentially far-reaching problem: the bill’s dispute resolution provisions. The Port City Bill proposed to establish an International Commercial Dispute Resolution Centre (ICDRC) that uses arbitration to settle disputes within the SEZ, effectively ousting the jurisdiction of Sri Lankan courts. This ouster is contentious given that the courts have, in the past, held that legislation cannot oust its jurisdiction. Still, the ICDRC survived judicial scrutiny and was passed into law.

The Port City Bill and the ICDRC, in particular, exemplify a particular logic of outbound Chinese capital, one that, in my recent article based on three years of fieldwork and nearly 150 interviews, I summarize as “Chinese law and development” (CLD). Whereas previous capital-exporting countries, and in particular, the U.S., have sought to reform the legal system of host states, often in line with their own experience of law, Chinese parties are mostly not interested in engaging in the legal reform of host states. Rather, they have shown a greater interest in creating institutions of transnational law, including international arbitration centers—both within the People’s Republic of China and outside its territory—that can avoid Chinese companies from having to litigate in host state courts.  

Opening Ceremony Colombo Port City Project (Public Ownership)

Taking a step back, “law and development” most generically refers to the relationship between law and economic development in what used to be called the “Third World,” and is particularly understood as technical legal development assistance as provided by donor states to host ones. The career of David Trubek at the University of Wisconsin Law School is most commonly associated with the U.S. experience of law and development, one that has undergone a series of waves. Chinese law and development (CLD) is different from Trubek’s view of the notion. For the most part, the Chinese government does not send out legal technicians to advise foreign states on how to design legal institutions or draft legislation, efforts under-girded by assumptions about the capacity of law to stimulate economic growth.

Instead of popular accounts that envision China as hegemonic, and roughly analogous to previous economic superpowers, China is emerging into the world economy during a period of widespread anxiety about Chinese influence, anxiety that takes the form of investment screening, trade tariffs, and immigration blockades. Further, China’s own experience with legal reform shows how law offered one set of norms, among others (e.g., administrative directives, dictates of the Chinese Communist Party, political campaigns, etc.) that facilitated (and sometimes impeded) economic experimentation. CLD thus addresses how the Chinese government and Chinese enterprises protect their assets, investments, and personnel in challenging legal and regulatory environments. To do so, CLD unzips the toolkit of such Chinese parties to demonstrate the plurality of means by which they secure their commercial and also geo-economic interests.

The co-creation of what elsewhere I have called “exceptional zones” such as SEZs with their own dispute resolution mechanisms that feature rules different from those of the host jurisdiction is one such method. In addition to Sri Lanka, there are other extraterritorial examples, such as that of the China-Africa Joint Arbitration Centre. These jurisdictional archipelagos foster transnational law by allowing parties to opt out of the national law of host states and choose alternative law, which theoretically could be Chinese law. Hence, issues of governing law in contracts that are the basis of disputes, as well as language of arbitration, nationality of arbitrators, and related procedural issues, loom large as these new legal hubs start to accept cases. While these archipelagos are not unique to Chinese outbound capital, Chinese parties seem to be particularly focused on their promotion. More broadly, CLD raises important questions concerning how exceptional zones impact legal development and access to justice in emerging economies.

Matthew Erie’s paper ‘Chinese Law and Development’ was published in the Harvard International Law Journal earlier this year and is available for free here.

Matthew S. Erie is an Associate Professor, Member of the Law Faculty, and Associate Research Fellow at the Centre for Socio-Legal Studies at the University of Oxford. He is also the Principal Investigator of the “China, Law and Development” project (grant agreement No 803763), based at the University of Oxford. You can follow him on Twitter @MatthewErie or reach out to him at matthew.erie(at)law.ox.ac.uk.

Hong Kong Between ‘One Country’ and ‘Two Systems’

14. June 2021
A forthcoming book by Larry Catá Backer
Hong Kong Tram with National Security Law Government Campaign (Wikimedia Commons)

Hong Kong Between “One Country” and “Two Systems” examines the battle of ideas that started with the June 2019 anti-extradition law protests and ended with the enactment of the National Security and National Anthem Laws a year later. At the center of these battles was the “One Country, Two Systems” principle. By June 2020, the meaning of that principle was highly contested, with Chinese authorities taking decisive steps to implement their own understanding of the principle and its normative foundations, and the international community taking countermeasures. As events progressed between June 2019 and June 2020, the author devised a series of essays that analytically chronicle the discursive battles that were fought, won and lost. Without an underlying political or polemical agenda, the essays retain the freshness of the moment, reflecting the uncertainties of those times as events unfolded. What was won on the streets of Hong Kong from June to December 2019, namely, the public and physical manifestation of a principled internationalist and liberal democratic narrative of self-determination, and of civil and political rights, was lost by June 2020 within a cage of authoritative legality legitimated through the resurgence of the normative authority of the state and the application of a strong and coherent expression of the principled narrative of its Marxist-Leninist constitutional order. Ironically enough, both political ideologies emerged stronger and more coherent from the conflict, each now better prepared for the next one.

Book Front Cover (Courtesy of the Publisher)

The essays written between June 2019 and June 2020 are compiled in Hong Kong Between “One Country” and “Two Systems” with little change to how they were originally written. The book is presented as a diary with essays as diary entries. This is to mark an intellectual progression that matches the development of Hong Kong’s political turmoil. The object is to capture not just the strategic and normative developments that produced Hong Kong’s new order from June 2020, but also to give a sense of the uncertainties and anticipations that existed leading up that moment. The process of ideological genesis from June 2019 to June 2020 is most immediately captured from a state of anticipation without the benefit of foresight. It is that immediacy that adds a layer of analysis to the usual post facto accounting and examination of events. That layering, anyway, is the aim. The essays in Hong Kong Between “One Country” and “Two Systems”, then, do not look back on events after the fact, but speculate, discover, and capture moments that from June 2020 look inevitable but which from the perspective of June 2019 appeared far less so. By doing so the book aims to retain the freshness of the moment. It is, thus, both a journal of events, and a journey. For its readers it may serve as a record of how the way of thinking about the situation of Hong Kong changed radically over such a short period of time. It is also, in part, a chronicle of the way in which larger events—the US-China trade war, and the COVID19 pandemic—can have a substantial effect on what would otherwise be a localized affair.

The focus of the book is on discourse. The essays follow events as they unfolded through the rhetoric of the parties involved–their statements, their gestures, their performances on the streets, and ultimately the memorialization of these discourses in the landmark laws of the Hong Kong after June 2020–the National Anthem Law and the National Security Law. To some extent this discursive focus owes a debt to and might be comfortably embedded within analytic traditions that owe much to the insights of Guiguzi (鬼谷子) and its rhetoric,[1] which makes its appearance throughout the essays and perhaps binds them together into something more coherent. These insights frame some of the analysis, as do the insights of critical thinkers from the Western tradition.

June 2019 protests in Hong Kong (Studio Incendo)

Hong Kong Between “One Country” and “Two Systems” is organized into six parts. Part I (Epilogue as Introduction) starts at the end of the story. It uses a rare statement endorsed by a substantial majority of the representatives of the United Nations Human Rights special procedures calling for the development of decisive measures to protect human rights in the face of the enactment by Chinese authorities of the National Security Law for Hong Kong. This is to situate the story of Hong Kong between June 2019 and June 2020 from the perspective of the international community–perhaps among the actors most adversely affected by the story of Hong Kong.

Part II consists of eleven chapter essays. These essays take the reader from the beginning of the protests in June 2019 to the end of August 2019. The essays serve as an analytical witness to the development of the initial phase of the Hong Kong protests. Step by step, as it occurred, Part II considers the escalations of ambitions and tactics of the protesters, the growing intransigence of local officials, and the start of what would become an elaborate and largely effective counter position of the Chinese central authorities. Much of what occurred during these early weeks provided the foundation for everything that developed thereafter.

Part III consists of seven essays. The essays chronicle critical events taking place from the beginning of September to the end of November 2019. These take the reader through the next phase of development, one in which initial positions are fully developed and hardened. Here one sees fully developed the ideological position of the central authorities that in retrospect were faithfully memorialized in the National Anthem Law, the National Security Law, and recent amendments to the Election rules in the Hong Kong Basic Law in March 2021. At the same time, one encounters here the maturing of an aligned position of the various groups of protesters that sought to deepen the internationalization of their movement and preserve efforts to permanently protect a measure of liberal democratic order in Hong Kong. Lastly, the international response also developed in this period: grounded first in the narrow strictures of the Sino-British Joint Declaration and thereafter in general fundamental principles of self-determination and the international civil and political rights of coherent political communities.

Part IV then considers two stalemates. Firstly, three essays cover the relatively short period of stalemate between December 2019 and April 2020 which includes the apex of protester power in December 2019 and January 2020. Secondly, the stalemate imposed by the realities of the worldwide COVID-19 pandemic. One moves here from the unabated storm of protest to the opportunity that the pandemic provides local and national authorities to break the stalemate in their favor. It was during this period that the stakes around the proper conceptualization of the One Country Two Systems principle became clear. On one side were central authorities who now fully developed the construct of the principle as a means of permitting autonomy within the discretionary authority of the state. On the other were the protesters and the international community who now saw in One Country Two Systems a principle of divided sovereignty in which the political choices of the Hong Kong community could be protected against encroachment by the central authorities, one based on international liberal democratic and human rights principles.

Part V chronicles the end of the protest movement and the emergence of a “new” Hong Kong between May and July 2020. Its seven essays critically chronicle the way that the central authorities drove events from May 2020, in a way that paralleled how protesters drove events between June and September 2019. Part V starts with the announcement of an intention to impose the National Security Law, by first devising the National Anthem Law and then ending with the adoption of the National Security Law itself. The seven essays here consider the importance in developing a patriotic front as a means of dividing and managing the people of Hong Kong, and consider the relatively little opposition that the central authorities faced in realizing their objectives.

The single essay that makes up Part VI serves as the after-word of Hong Kong’s story. Part VI is meant not only to end the story of the protests in Hong Kong but also to begin the story of Hong Kong as a more integrated part of the Pearl River area of China. No longer an international city in the sense of being internationally recognized and having a protected legal autonomy from its territorial sovereign, Hong Kong now rejoins the nation as a Chinese city with substantial international connections. Beyond that, Hong Kong’s future is now far more closely aligned with that of the Chinese heartland and with the vision of China’s central authorities for the nation as a whole.

The publisher, Little Sir Press, will be hosting a book launch author meets reader webinar on 13 July 2021.  Registration is required but free. Free chapters and more about Hong Kong Between ‘One Country’ and ‘Two Systems is available here

Larry Catá Backer is the W. Richard and Mary Eshelman Faculty Scholar, Professor of Law and International Affairs at Pennsylvania State University (B.A. Brandeis University; M.P.P. Harvard University Kennedy School of Government; J.D. Columbia University). He researches in the areas of Marxist Leninist political-economic systems with a focus on China and Cuba, economic globalization, corporate social responsibility, international affairs, global governance, trade and finance, and semiotics. In addition to his own books, Backer has published over one hundred articles and book chapters in journals in the U.S., Latin Americas, China, and Europe. For a list of his publications, please click here. Backer also runs his own blog, Law at the End of the Day


[1] Guiguzi (鬼谷子), Guiguzi: China’s First Treatise on Rhetoric; A Critical Translation and Commentary (Hui Wu (trans.); Carbondale: Southern Illinois University Press, 2016 (before 220 A.D.))

China’s Law and Development: The Case of the China International Commercial Court

6. June 2021
A new paper by Weixia Gu
Appointment of the First Batch of CICC International Commercial Experts Committee

In June 2018, the China International Commercial Court (CICC) was established within China’s Supreme People’s Court. It is a top-down capacity-building effort in establishing dispute resolution infrastructure and represents the ambition to create a lex mercatoria in the context of the Belt and Road Initiative (BRI). This blogpost highlights some salient features of the CICC and sheds light on its significance in China’s Law and Development.

First, CICC installed an International Commercial Experts Committee (ICEC) to make up for the lack of non-Mainland Chinese judges among its personnel. It draws on experts from both civil law and common law jurisdictions with diverse backgrounds (Eastern, Western and African legal culture). Members of the ICEC will provide foreign legal expertise to engage in the CICC mediation work, the outcome of which could be turned into a CICC judgement equivalent to “semi adjudication.” The ICEC has two main functions: first, presiding over mediation proceedings of international commercial cases which can be converted into a CICC judgement; second, providing advisory opinions on proof of foreign law and on international treaties, international commercial rules. The ICEC is argued as emblematic of the “paradigm shift” of the Beijing Consensus which traditionally emphasises soft law in international legal ordering such as what has happened in the Belt and Road context. Scholars have argued about a rising new Chinese economic legal order that is characterized by China’s decentralized mode of trade governance through a pragmatic, incremental development policy grounded in soft law and norm-based networks (Shaffer & Gao 2020). This is shown in China’s approach toward the BRI (yidaiyilu 一带一路) as China largely relies on memoranda of understanding and soft law agreements. There is no stringent cross-border legal framework or rigid regulatory structure in China’s approach toward the BRI. The advent of the ICEC however points to a new focus on institution-building which is somewhat a departure of the previous soft-law approach. Apart from that, the ICEC also showcases a breakthrough in the Chinese legal system in light of the existing statutory impediments found in, for example, China’s Judges Law, which allows only Mainland Chinese nationals to sit on the Chinese judicial benches. It reflects a more proactive, experimental, and innovative mentality adopted by the Chinese government and judiciary in seeking to incorporate overseas judicial expertise so as to compete in the global dispute resolution market.

The CICC signifies China’s major step towards a dual-track model which places equal emphasis on both soft-law instruments and hard-law capacity-building of legal infrastructure. Second, the CICC brands itself as a “one-stop shop” for diversified dispute resolution, incorporating alternative dispute resolutions (ADRs) into conventional litigation. Under this vision, international commercial litigation, arbitration and mediation are blended and integrated to facilitate the resolution of international commercial disputes brought before the CICC. The CICC also links with China’s five most market-driven arbitration institutions – China International Economic and Trade Arbitration (CIETAC), Beijing Arbitration Commission (BAC), Shenzhen Court of International Arbitration (SCIA), Shanghai International Arbitration Centre (SHIAC), China Maritime Arbitration Commission (CMAC), and two leading commercial mediation institutions – China Council for the Promotion of International Trade (CCPIT) Mediation Center and Shanghai Commercial Mediation Centre (SCMC). If disputing parties have reached a mediation settlement agreement before the CCPIT Mediation Center or SCMC, the CICC may also make a CICC judgment based on the mediation agreement if it is requested by the parties. This conversion of the institutional mediation settlement agreement into a CICC judgment is an unprecedented arrangement, evidencing the experimental and law-positive nature of China’s approach to the BRI and the new Beijing Consensus.

From the Law and Development perspective, the establishment of the CICC exemplifies a turning point in the Beijing Consensus to move away from the heavy reliance on norm-based instruments in international legal ordering.

Third, the CICC has a guaranteed caseload. Structurally, the CICC is within the hierarchy of the Chinese domestic judiciary. It forms part of China’s Supreme People’s Court of which both the first CICC in Shenzhen and the second CICC in Xi’an are permanent branches. Flowing from this structure, it is ensured that the CICC continuously has a high caseload as the Supreme People’s Court in Beijing directly refers cases to them. In fact, the case flow under the CICC Provisions includes “other international commercial cases that the Supreme People’s Court considers appropriate to be tried by the CICC.” (Provisions of the Supreme People’s Court on Several Issues Regarding the Establishment of the International Commercial Court, Article 2(5), English here). Comparative studies show that the feature of “rooting” the international commercial courts within the domestic judicial system is similarly found in other jurisdictions, such as the Singapore International Commercial Court and the Chamber for International Commercial Disputes of the Frankfurt Regional Court in Germany.

The establishment of the CICC arguably represents a paradigm shift of the “Beijing Consensus”, which traditionally placed emphasis on informal alternatives to law (i.e. a soft-law and norm-based approach). The CICC signifies China’s major step towards a dual-track model which places equal emphasis on both soft-law instruments and hard-law capacity-building of legal infrastructure. From the Law and Development perspective, the establishment of the CICC exemplifies a turning point in the Beijing Consensus to move away from the heavy reliance on norm-based instruments in international legal ordering (such as Memorandum of Understandings, Memorandum of Agreements, Joint Statements etc. involved in the BRI) to hard-law institutional infrastructure capacity-building.

Finally, the CICC benefits from China’s accession to the Hague Convention of 30 June 2005 on Choice of Court Agreements (Choice of Court Convention) (the Hague Convention) which was signed in September 2017. Recognition and enforcement of the judgments rendered by the CICC can be facilitated via the Hague Convention.

For details, please find Weixia Gu’s forthcoming article regarding the CICC and Law and Development Study at Harvard International Law Journal here. Please also find her recent monograph, Dispute Resolution in China: Litigation, Arbitration, Mediation and Their Interactions published by Routledge in 2021 here.

Weixia Gu is Associate Professor at the Faculty of Law, University of Hong Kong and immediate past Co-Chair of the American Society of International Law (ASIL) Asia-Pacific Interest Group. Her research focuses on arbitration, dispute resolution, private international law and cross-border legal issues. Her scholarship is published by leading comparative and international law journals and cited by leading judiciaries in the world. She is the recipient of University of Hong Kong’s Outstanding Young Researcher Award and three times the awardee of China Society of Private International Law Best Research Output Prize. Her recent books include The Developing World of Arbitration (Hart, 2018); Dispute Resolution in China (Routledge, 2021); Multi-tiered Approaches to the Resolution of International Disputes (CUP, 2021). Contact her at guweixia@hku.hk.

Chinese Antitrust Exceptionalism

21. May 2021
Opinion by Angela Huyue Zhang

In recent months, Chinese antitrust authorities have ramped up their efforts to rein in Big Tech firms such as Alibaba, Ant Group, Meituan and Tencent.  These enforcement actions were all launched after Jack Ma’s controversial speech criticizing Chinese financial regulation last October. Many have therefore speculated that there are political motivations behind China’s crackdown on Big Tech.  While Ma’s speech may have been the tipping point, there have been long-standing economic, social, and industrial policy issues that merit the government’s action. In fact, Beijing’s recent efforts to strengthen antitrust regulation in the tech sector could facilitate a larger goal of the Chinese government: to become a technology superpower and achieve self-sufficiency, removing reliance on the West.

In this regard, how China handles antitrust law offers it a distinct competitive advantage, particularly compared with the U.S., which is also grappling with how to handle tech giants. Even though efforts to rein in companies such as Google and Facebook have gathered momentum, the U.S. government has significantly less leverage than China when it comes to antitrust law. Indeed, any U.S. legislative changes will take years to enact, and existing antitrust cases brought against Big Tech also face uphill battles in U.S. courts.

China shares some of the same concerns as the U.S. over increasing market concentration in the tech sector. However, Chinese big tech companies do not thrive because they develop innovative technologies. Rather, they build smart apps that make it easier for consumers to connect with merchants. Even though China has emerged at the forefront of e-commerce and digital payment, Chinese Big Tech still owes its success, to a large extent, to China’s vast consumer market.  

Despite their sophisticated software development capabilities, companies such as Tencent and Alibaba have yet to develop foundational technologies. China’s fragility in technological innovation was clearly exposed during the Sino-American trade war—the operations of national champions such as ZTE and Huawei could be easily interrupted if the U.S. government withheld the supply of key components such as semiconductors.

China’s weakness in technological innovation explains Beijing’s recent emphasis on achieving technological self-reliance and its desire to push Chinese tech giants in this direction. Since China is the only country apart from the U.S. to have Internet giants, these tech firms are in a good position to develop digital technologies for the country. In some ways, Chinese tech giants have responded to the government’s call. Tencent has promised to invest $70 billion in new digital infrastructure. In 2019, Alibaba unveiled its first chip to power artificial intelligence. Baidu is betting heavily on driverless cars. 

But Beijing wants more. Its intentions were clearly revealed in a recent editorial by the People’s Daily, a Communist Party mouthpiece, which chided tech firms for investing in the “community group-buying” market. The commentator instead urged Chinese Internet giants to forge ahead with higher ambitions, such as advancing technological innovations to clear China’s bottleneck in the intensive Sino-American rivalry, rather than focusing on selling cabbages.

In the meantime, antitrust law enforcement gives Beijing significant regulatory leverage to push its tech firms in the direction it desires. Antitrust law grants the central government strong sanctioning powers, allowing it to impose anything from astronomical monetary fines to severe structural remedies. The Chinese antitrust regulator also possesses vast administrative discretion while being subject to little judicial oversight. Furthermore, Chinese antitrust law enforcement is spearheaded by a central ministry that follows the central government’s directives carefully.   

As Chinese tech giants have amassed significant market power, they have become vulnerable to antitrust regulatory attacks. And just as U.S. and EU regulators are tightening their antitrust scrutiny over Big Tech, the Chinese antitrust authority also has perfectly legitimate reasons to do so. The regulatory vulnerability of Chinese Big Tech, in turn, facilitates their cooperation with Beijing to help the latter achieve its goals, be it in antitrust or other industrial policy matters.  Thus, Chinese Big Tech can and do align their business development strategies with the government’s industrial policy as a form of self-protection.

Indeed, the Chinese government views antitrust law as a powerful multipurpose tool not only for tackling monopolies, but also for achieving a wide variety of policy objectives, such as maintaining price stability, industrial planning, and trade and foreign policy. Thus, the absence of checks and balances in Chinese antitrust enforcement, supposedly an institutional weakness, could actually be a strength for Beijing as it pushes tech giants and the country toward achieving technological self-sufficiency.

Angela Huyue Zhang is the director of the Center for Chinese Law and Associate Professor of Law at the University of Hong Kong. She is the author of Chinese Antitrust Exceptionalism: How the Rise of China Challenges Global Regulation, published by Oxford University Press in March 2021.  This opinion is an abridged version of an opinion that was first published with Fortune: China antitrust: How regulation helps it compete with the U.S. | Fortune.