Chinese company law is going through significant reforms. The current law, first passed by the National People’s Congress in 2005 and last amended in 2018, has played an important role in establishing a modern enterprise system and promoting the development of a socialist market economy in China. As stated in the explanatory notes for the first draft amendment to the Company Law, the current law provides the fundamental and theoretical legal framework for companies; however, it lacks detailed rules, in particular, in the areas of directors’ liabilities and the protection of shareholders and creditors. This article maps the proposed amendments and draws parallels to Company Law in the United Kingdom.
To mend these shortcomings, two amendments have been proposed: The first draft amendment was published on 24 December 2021 by the Standing Committee of the 13th National People’s Congress for soliciting comments from the public. Based on the feedback and rounds of consultation, the amendment was revised and the resulting second draft amendment was issued on 27 December 2022. The probably final round of deliberation is expected in August 2023. This is the third major reform of the 2005 Chinese Company Law following the amendments in 2013 and 2018. As laid out in the explanatory notes that accompany the draft amendment, the main purposes of this Company Law reform are to “deepen state-owned enterprise reform, improve business operation environment, improve the protection of property rights and optimize fundamental systems for the capital market”.
The stated aim manifests in the following concrete changes:
The Chinese party-state is given stronger controls over its state-owned enterprises, as decisions made in previous years by the Central Committee of the CPC are woven into the Company Law.
Some clarity on the duty of diligence (勤勉义务) and the duty of loyalty (忠实义务): While the 2005 Company Law stipulates that directors, supervisors and senior managers all owe a duty of diligence and a duty of loyalty to their companies, and lists some activities they must not engage in, specific rules for the application of these requirements are lacking. The proposed amendment (draft article 180) defines the duty of diligence similarly to the duty to exercise reasonable care, skill and diligence as stipulated in the United Kingdom’s 2006 Company Act.
Detailed rules on self-dealing: The draft amendment suggests detailed notification and approval procedures for when supervisors, directors and senior managers enter into a contract or transaction with the company (draft article 183).
Expansion of the corporate opportunity doctrine: Under the current Company Law, the duty to refrain from taking advantage of one’s position to acquire a business opportunity that belongs to the company applies to directors and senior managers only. The draft amendments not only extend this duty to supervisors, but also lay out exceptions such as when the business opportunity was rejected by the board of directors or the shareholder meeting (draft article 184).
Clarification of the joint liability of directors, senior managers and controlling shareholders with the company (draft articles 190 and 191): Directors and senior managers will be jointly liable with the company if they have, either deliberately or due to gross negligence, caused losses to other people when they are performing their duties.
Giving teeth to corporate social responsibility duties: The Company Law requires businesses to not only abide by laws and regulations, but also “observe social morals and business ethics, act in integrity and good faith, accept the supervision of the government and the public, and bear social responsibility” (Article 5). Critiques have pointed out that this provision is a paper tiger as it is broad and comes without remedies. While the draft amendment does specify who the stakeholders are (employees, consumers, and the environment), concrete measures for the enforcement of this rule are not proposed (draft article 20).
Finally, the proposed amendment introduces the double derivative action (draft article 188). Derivative actions are suits brough by shareholders in the name of the company against a third party, normally a director of the company. The institution of the double derivative action, as laid down in the draft Article 188, allows a shareholder in a parent company to sue the directors, supervisors and senior managers of its wholly-owned subsidiary.
This paper explores the rationale for the current law reform and analyses the proposed changes in relation to directors’ duties and the protection of shareholders’ interests. It also assesses the relevant law in the 2006 Companies Act of the United Kingdom in order to draw comparative lessons for future company law reforms in China. The proposed amendments have not solved all of the problems in relation to the current law on directors’ duties and shareholders’ derivative actions; nevertheless, they undoubtedly reflect Chinese legislators’ effort to improve the corporate legal framework and enhance corporate governance in China. If these proposals are adopted in the final legislation, they will bring significant improvement to company law and corporate governance in China; ultimately, they will make Chinese companies more competitive and attractive to both home and foreign investors.
Dr Fang Ma is a Senior Lecturer in Law at the University of Portsmouth in the UK. Her research interests include Company law and Corporate Governance in China and in the UK. She can be contacted at fang.ma[at]port.ac.uk.
How does the Chinese system deal with supervening impediments to contract performance? In this article (draft), I address this question from the angle of the (unbalanced) interrelationship between two doctrines: the doctrine of force majeure (不可抗力) and that of change of circumstances (情势变更). The imbalance can be readily seen from the current judicial data showing that the doctrine of force majeure has been applied by Chinese courts ten times more often than the doctrine of change of circumstances. This article offers explanation to the reasons and implications of this striking situation.
It first briefly traces the history of the two doctrines and makes three inquiries about their interrelationship. First, do they address different events? It is noted that there is a general tendency in China to categorically characterise certain events, including the COVID-19 pandemic, as force majeure. This tendency, which neglects or downplays a proper assessment of the event’s actual or potential impact on the performance of the particular contract, is rejected in this article. I discuss various elements of the two doctrines such as the tripartite ‘unforeseeable, unavoidable and insurmountable’ requirements and the ‘non-commercial risk’ requirement, as interpreted and applied in Chinese cases or judicial documents. I conclude that all these elements are intrinsically interwoven with the particular parties and contracts and must be ascertained as such. For example, ‘commercial risks’ should be understood as no more than ‘inherent’ or ‘normal’ risks and therefore depend on the particular parties and contract for ascertaining the scope of ‘inherency’ or ‘normality’. Although this requirement seems to be reserved for the doctrine of change of circumstances, the same requirement is captured by the requirements for ‘unforeseeable, unavoidable and insurmountable’ under the doctrine of force majeure. Similarly, the latter requirements should equally be applied under the doctrine of change of circumstances. In this sense, there is a relationship of homogeneity between the two doctrines.
The second inquiry moves on to explore the different ‘contract impact’ tests applied under the two doctrines. The doctrine of force majeure encompasses two such tests: whether the event results in a situation that the affected party ‘cannot perform’ its side of the contract (the ‘cannot perform’ test) or whether the event renders the purpose of the contract ‘unfulfillable’ (the ‘contract purpose’ test). The doctrine of change of circumstances, since the enactment of the Civil Code, endorses a single test: whether the event renders continuing performance of the contract ‘manifestly unfair’ to a party (the ‘manifest unfairness’ test). This is a critical point of division between the two doctrines – they are distinguished in their respective ‘contract impact’ test(s). One problem in Chinese judicial practice is that excessive use has been made of the ‘cannot perform’ test, which is further discussed in the article. More detailed discussion of the other two tests is left to future research.
The third and final inquiry concerns the differing legal consequences attached to the two doctrines. The most notable remedial difference between the two doctrines is that contract adaptation (or modification) is available only under the doctrine of change of circumstances. This article reviews the general principles/rules for contract adaptation and its relationship with contract renegotiation. In particular, contract adaptation is distinguished from ‘exemption of liability’, which is a unique remedial consequence attached to force majeure, in that contract adaptation varies primary obligations under the contract whilst ‘exemption of liability’ affects secondary obligations only. However, there remains ambiguity as to the meaning of ‘exemption of liability’ which in practice has led to increased discretion.
The second half of the article attends to cases involving a contract affected by COVID-19, bringing the discussion above to a specific context. Cased decided and judicial documents issued by Chinese courts (especially the Supreme People’s Court) concerning SARS and COVID-19 (for a more detailed outline of Covid-19 judicial documents, see Qiao (2020)) are analyzed. I argue that a wider reception of the doctrine of change of circumstances can be observed from COVID-19 documents and should be encouraged. A categorical characterisation of COVID-19 as force majeure should be avoided. Which of the two doctrines is best to be applied in a particular case should be left to be determined through the ‘contract impact’ tests.
It is also observed that from the SARS pandemic to the COVID-19 pandemic, both the meaning and role of the ‘cannot perform’ test have undergone some transformation. The SARS cases are dominated by a narrow understanding of the ‘cannot perform’ test by unduly excluding cases where a party ‘can’, but decides not to, perform the contract. COVID-19 cases, on the other hand, display the revival of a broad interpretation, which equates ‘cannot perform’ with a ‘failure to perform’. Unfortunately, in practice, mostly due to the undisciplined extension of ‘exemption of liability’, the ‘cannot perform’ test has been much overused and abused. This article thus calls for a more structural and coherent approach to the allocation of work between the two doctrines.
Qiao Liu is Professor and Deputy Director of the Centre for Chinese and Comparative Law, School of Law, City University of Hong Kong; Honorary Professor, TC Beirne School of Law, University of Queensland; Adjunct Chair Professor, School of Law, Xiamen University. The work described in this paper was fully supported by a grant from the Research Grants Council of the Hong Kong Special Administrative Region, China (Project No. 11608821).
China runs the largest online program for publicizing judicial decisions in the world. The mass publicity of court decisions in China, this article (draft here) argues, is part of the broader trend of the Chinese judiciary becoming increasingly centralized. The mass publication of court decisions in China seems puzzling: Disclosure of government information is often linked to an aspiration for political participation, which contributes to accountability and creates an obligation for responsive government. As a style of governance, transparency is usually associated with democracies, and few authoritarian states show much interest in government transparency.
In this article, the authors explain the reform towards greater transparency of the Chinese judiciary in a principal-agent theoretical framework and contextualize it within strategic moves of the central and the local governments in this setting. Previous studies of the political system in China have documented a deeply rooted agency problem between the central government (the principal) and local courts (provincial courts and courts at the lower levels – the agents), often discussed as “local protectionism”: The primary goal of the Supreme People’s Court is that centrally stipulated laws are applied in a unified way for the entire country, however, such application may conflict with local interests and social stability in local communities. Hence, in practice, courts often function as a local apparatus that protects local interests. This tension between the central government and the SPC on the one hand and local governments and respective courts on the other is a result of the structure of the Chinese political system. For example, local courts’ finance and personnel are controlled by local governments. While it is on the reform agenda to make the high court at the provincial level control and manage the finances of all courts in the province, control over personnel remains with the local governments. More importantly, information asymmetry embedded in the multiple-layered government structure and thereby the inability for the centre to monitor the local.
Responding to this dilemma, the Supreme People’s Court carries out a reform towards transparency. The mass publicity of court decisions, this article contends, is a top-down effort to address the principal-agent problem. By means of establishing a centralized judicial data collection system, the Supreme People’s Court can more directly control the information reporting process within the judicial hierarchy and reduce information asymmetry. By making mass local court decisions publicly available on a centralized venue, it attempts to curb wrongdoing and improve decision consistency and quality in local courts through public oversight. Together, the transparency reform helps the centre (i.e., the SPC) rein in local courts.
As in most principal-agent settings, agents, here local courts, responded strategically, by disclosing fewer decisions than required. After the Supreme People’s Court mandated judicial decision disclosure for courts in 2014, disclosure rates remained low, at 39.4%, 44.5%, and 47.9% in 2014, 2015, and 2016, respectively, with strong regional variations. For example, the disclosure rate of Tianjin in 2016 was about 71%, while that of Hainan was only 16%.
In the existing personnel arrangement, local governments control the appointment and promotion of judges. Yet an increasing number of provincial high courts are now presided over by judges or officials who have work experience at the SPC or other agencies of the central government. Our data shows that judicial decision disclosure rates increased at courts that were headed by cadres with work experience in the central government. We find that the presence of these cadres is associated with more than a 10 percent higher disclosure rate of judicial decisions by the respective court. This finding suggests that the dispatched judicial cadres were quite successful in promoting transparency of the courts in their jurisdictions according to central policy – just as they are in promoting other central policies.
The transparency reform is to be contextualized within other reforms toward a more centralized judicial sector in China. Local protectionism of courts, that is, courts serving local interests rather than following the law, is well documented in the literature. The requirement that all judgements be uploaded to the centralized website enables the SPC to supervise local courts’ behaviour not only through public oversight but also through steering legal development in a certain direction, and aligning local judicial decisions with its own policy goals. For example, the SPC can easily search for local judgements and check whether their decisions are consistent with judicial interpretations and guiding cases.
Lei Chen is Chair of International Arbitration and Chinese Law at Durham Law School, UK. He has been elected as a Titular Member of the International Academy of Comparative Law and a Fellow of the European Law Institute.
Zhuang Liu is an Associate Professor of Law at the University of Hong Kong. His research interests include the role of the courts and judicial behaviour, as well as law and development. His work has appeared in several leading academic journals specialising in law, economics, and China studies.
Yingmao Tang is an Associate Professor at Peking University Law School. His research interests include international finance regulation, investment law and the Chinese judicial system. His recent work focuses on opening China’s capital markets, online judicial transparency and big data & computational legal studies.
Media outlets and government websites use cartoons to explain SCS practises
Much has been said and written about China’s Social Credit System (SCS). Stories about an almighty, high-tech surveillance dictatorship that rates its citizens are persistent in global media discourse while the image of an omnipresent and omnipotent social credit score already found its way into memes. An increasing number of observers debunk the horror stories with facts and point to the low-tech nature of most SCS projects. As unfounded as many social credit stories are, they have also fuelled a long-overdue debate outside of China about data protection and the power of assessments. In a proposal for an AI regulation, the European Union cast the imagined “social credit scoring” as antagonist.
Meanwhile, the social credit stories and their policy responses abroad overshadow the actual innovations and challenges that the SCS brings to governance in China. The SCS does not have the capacity to function as the Orwellian surveillance tool it is often depicted as, but that does not mean that it is less ambitious and transformative. Zooming in on one of the multiple innovations that emerge under the SCS’s overarching aim to engineer trust, we studied the architecture behind the systematic disclosure of information on the “untrustworthy” (失信人) and, in a second part, interrogate paths to relief for targeted subjects. Those who find themselves shamed as “untrustworthy” are almost exclusively persons who have violated laws and regulations or not fulfilled court orders, rather than persons who have breached unspecified moral norms, and consist overwhelmingly of companies rather than individuals. The SCS’s shaming practices are thus best contextualized within public regulation work. Our study finds that the SCS formalizes and elevates a concept of public regulation that is best conceptualized as reputational regulation to new prominence. Shaming as a regulatory tool is not new and has been applied by state agencies globally. The Occupational Safety and Health Administration of the USA for example routinely uses its Twitter account to shame companies that violated work safety rules. However, the SCS is the first central-level government strategy that systematically implements shaming schemes in all regulatory realms from transport to food safety and equips the practice with a clear rhetorical framework. Public disclosure of compliance assessments is also a common practice in emerging, transnational ESG regimes (Environmental, Social and Corporate Governance). The driving factors of both, the SCS’s reputational regulation scheme and global ESG regimes are similar: The aim to enforce norms of public interest in the absence of an efficient and comprehensive regulatory infrastructure.
We first identify three pillars of successful reputational regulation through a review of empirical and theoretical literature on reputational regulation and then point out how the SCS realizes them.
(1) In reputational regulation, the declared purpose of the information disclosure is to punish, rather than to increase government transparency or warn of dangers (e.g., from poisoned food products). The NDRC and PBoC stipulate blacklisting and the public sharing of information on trust-breaking in their 2022 list of SCS disciplinary measures. Both sanctions are reputational only, as the more tangible punishments that come with blacklisting, such as restrictions on market access and subsidies, are listed separately. Further, a plethora of core structural policies document the punitive purpose of disclosure, for instance the foundational Planning Outline on the Construction of a Social Credit System (2014-2020) calling to “give rein to the role of the masses in appraisal, discussion, criticism, and reports, shape social deterrence through social moral condemnation, and censure trust-breaking acts.”
(2) To ensure that the public and media generate the negative publicity necessary to pressure target subjects to change, a government agency engaging in reputational regulation needs to provoke this disapproval by embedding the disclosure within a moral message. The SCS endowed the existing disclosure strategy of dual publicity (双公示), which initially promoted disclosure of administrative punishment decisions to foster government transparency, with the trust-breaking rhetoric, making it part of the SCS toolkit. Negative social credit information technically consists merely of violations of laws and regulations and is not novel. The innovation brought by the SCS is to relabel selected categories of administrative information as “credit/trust information” and publicize them as such. To information recipients, the impression conveyed is that a violator of the law in one realm is overall untrustworthy. The trust rhetoric dominates all publication formats: Blacklists and disclosure platforms carry titles such as “seriously untrustworthy companies”.
(3) Finally, reputational regulation requires that the information must be brought to the attention of actors who are in a position to exert pressure on the deviator. A variety of dissemination channels amplified by a state-dominated media environment ensure that information on trust-breakers reaches far. Apart from online platforms and local government websites, public billboards, announcements at local festivities, television and radio broadcast, ringtone announcements and various apps inform about who has been designated untrustworthy. Credit service agencies also tap into social credit information.
To summarize, the SCS drives a type of information disclosure that is intended more to punish than to warn, comes with a negative moral message, and is disseminated to the public through various channels. Regulatory shaming is, however, notorious for infringing on target subjects’ rights. Chinese literature has described the publication of negative social credit information as a new type of reputational punishment (声誉罚). The agency loses control over the scope and intensity of punishment once information is published because the punitive action itself is carried out by others. Even if a target subject successfully objects to the publication of adverse information and the agency takes it down, the reputational damage can hardly be undone. The second part of our study discusses how targets of reputational punishment under the SCS can seek legal remedy.
There are three potential paths to relief for those adversely affected by SCS-driven regulatory shaming in China: administrative reconsideration (行政复议) and litigation, internal agency controls, and the SCS’s own mechanism of credit repair (信用修复). The prior two paths may provide more or less satisfying outcomes for conventional administrative penalties such as fines, in the case of shaming however, revoking the agency’s act means only ceasing publication. Reproductions of the negative information concerned in news outlets and other channels remain in place. Additional remedies such as apologies and compensation payments appear necessary but while the Administrative Litigation Law provides for such remedies, we could not find court decisions ordering such remedial measures in social credit-related cases.
Where subjects believe to be unlawfully designated “untrustworthy” and bring the claim to court, they frequently face the following issues:
Whom to sue?
It is often unclear which agency is to sue because a single SCS penalty can involve multiple state agencies. For example, a construction bureau in Jiangsu blacklisted a company for not paying wages to migrant workers, resulting in a different local agency acting on the information by restricting the company from public bidding. When the company sued the construction bureau, the court held that the bureau was not the defendant. It held that the correct defendant was instead the other agency that had punished the company. In other cases, the agency that administered the blacklist was held to be the correct addressee. The confusion over the correct defendant in litigation may be further exacerbated by the trend to outsource shaming work to industry associations.
Are social credit penalties litigable?
If it was confirmed that social credit shaming measures constitute administrative punishment, the Administrative Punishment Law (APL) would apply, subjecting the shaming regulators to a series of procedures such as notifying targets beforehand and offering them a chance to defend themselves. Is SCS-driven regulatory shaming an administrative punishment? No legislation to date has clearly addressed this question. Courts regularly deny arguments that any SCS penalties, including shaming, constitute administrative punishment. Some claims have been accepted nevertheless with courts defining the SCS measure as an administrative act that has affected the plaintiff’s rights, and on this basis examined whether this act had the legal basis it needs according to law. A legal basis may consist of SCS regulations and measures issued by sectoral regulators from the ministry level down to that of local municipal agencies. In rather exceptional decisions, courts held that central-level policy documents that were not translated into local rules do not suffice as a legitimate legal basis for a social credit penalty.
Are social credit penalties subject to procedural restrictions?
A growing number of SCS policy documents stipulate procedures for social credit penalties, which increasingly find their way into local law where they can be invoked by courts. For instance, many local and sectoral regulations stipulate a duty on the part of the regulatory agency to notify a person before entering her on a blacklist. The Jingyang District Court of Deyang City ordered an agency to delete a negative record because the agency failed to “inform the administrative counterpart of the administrative decision to be made and listen to the administrative counterpart’s statement and defence.”
Just information disclosure or a reputational penalty?
In most instances, remedies for social credit penalties are denied because social credit measures pose conceptual novelties to adjudicators. In particular, the courts have invoked the accessory nature of publication, the necessity for government transparency, and the political priority of SCS building to reject plaintiffs’ claims. For Tianheng Investment Construction Management Ltd. from Hangzhou for example, appearing on a list of untrustworthy companies for having submitted forged materials meant the de facto end of its business, at least for the stipulated publication period of twenty-four months. However, the courts of all three instances denied the company’s claim that the disclosure was punitive, holding instead that publication was part of the agency’s duty to objectively record and publicize their decisions. In other cases, the SCS goals of building a trustworthy society and market have been invoked by adjudicators to legitimize credit information recording, scoring, and publication practices. Lianfa Construction & Engineering Ltd. had won an initial case against a local housing agency which had, without legal basis, imposed a social credit penalty. However, the court of appeal overturned the ruling, insisting that the mechanism for disciplining law-violating and trust-breaking behaviour must be perfected. As Peking University Professor Chun Peng points out, in the larger mission of SCS building, courts are not just the guardians of lawful conduct of state agencies but also “vanguards of disciplinary measures for trust-breaking”.
Litigation does little to alleviate the damages ensuing from undue shaming for trust-breakers. The clumsiness of shaming measures and their irreversibility render them hardly controllable through the judiciary. Alternatively, control mechanisms within the information handling agency may prevent undue damages. Only the ability to object prior to publication can provide an effective safeguard against wrongful shaming sanctions, and agency rules on social credit information lay down the procedures that lead to publication. However, no solution to effectively overseeing such procedural rules in the absence of judicial review has surfaced.
Finally, where target subjects admit guilt, they may obtain relief from shaming through the reintegrative path of credit repair. Credit is repaired and respective negative information publication halted if subjects correct untrustworthy conduct and eliminate negative impact, make credit commitments, participate in charitable activities, and/or undergo educational training, depending on the relevant sectoral and local credit repair mechanism. Credit repair is not strictly a remedial path as it does not operate on the premise of agency mistakes and in practice remains porous. However, with credit repair’s concept to function as a reintegrative path comes an innovation that has the potential to resolve the irreversibility of shaming: In some credit repair programs, instead of deleting the original negative record, that record is supplemented by a record of repair clearly explaining the reason for the repair and the final assessment.
Reputational regulation remains a work in progress. But is it effective? Other than traditional enforcement tools of state agencies such as fines, reputational regulation requires the cooperation of non-state actors, in this case, the shaming community which has to act upon disclosed information and exert pressure on the shamed subject. Initial studies found that company representatives across China believe reputational harm from negative publicity to be one of the key concerns with regard to the SCS. However, more research is needed to assess under which circumstances and to whom the disclosure of information on trust-breaking is relevant.
Marianne von Blomberg is a Research Associate at Bern University of Applied Sciences, Institute for Global Management, and is currently completing a PhD with Cologne University’s Chair for Chinese Legal Culture and Zhejiang University’s Guanghua Law School. Her research revolves around social credit regimes in China and beyond, assessment-based public regulation, and data governance. In her dissertation, she explores how the Social Credit System project in China strengthens, weakens, and transforms the law. She holds an LL.M in Chinese Law from Zhejiang University and a BA in Communication, Culture and Management from Zeppelin University. She can be contacted via Twitter @mariannehuashan or email at m.vonblomberg[at]uni-koeln.de.
Haixu Yu is a Research Associate and doctoral student of the Chair of Chinese Legal Culture. He passed the national judicial examination of the People’s Republic of China in 2014. His research interests include Chinese judicial reform and Chinese public law. Before studying in the University of Cologne, HaixuYu graduated from the Chinese University of Political Science and Law in 2018, where he received LL.M degree, majoring in Chinese economic law and fiscal law. He received his LL.B. and B.A. degree in 2015 also at China University of Political Science and Law.
A regulatory crackdown on China’s Big Tech in the past years has drawn attention to a blossoming business model: Micro loans extended on a massive scale through collaborations between banks and fintech firms such as Alibaba’s Ant Financial. The application of information technology has disrupted the traditional way of providing financial services and products in recent years. In China, a pioneer in developing new models for credit business based on fintech-bank partnerships, two main forms evolved, namely the model of loan facilitation and the model of co-lending (see figures below). The model of loan facilitation refers to the practices of fintech firms providing financial institutions with technical support and credit-related services. Under the model of co-lending, apart from the provision of ancillary services, fintech firms also contribute some funds to extend loans together with their partner financial institutions. This paper observes the FinVolution Group and Ant Group as examples to illustrate the two business models of FinTech-bank partnership.
By establishing business partnerships, fintech firms can leverage massive customer data and innovative platform technology to provide important assistance for financial institutions at some key junctures of the credit extension process, thus improving access to finance for more customers. The collaboration with fintech firms enables financial institutions to concentrate on their core business by outsourcing certain work and serve their customers with greater efficiency. Fintech firms can take advantage of the funds, expertise and resources of financial institutions to engage in credit-related business without applying for a separate license. The partnership with financial institutions can bring reputational benefits for fintech firms and strengthen their brand image in the credit market.
While fintech-bank partnerships may bring many benefits to China’s credit business, they also pose serious risks and problems. Firstly, the collaboration with fintech firms increases the operational complexity of financial institutions. Due to regulatory arbitrage, fintech firms are not subject to strict financial regulations. A challenge for financial institutions lies in dealing with outsourcing risks arising from misconduct of their partner fintech firms. Secondly, the exclusive control of data and technology on the part of fintech firms is likely to reinforce their monopolistic practices, thus leading to a vendor lock-in problem for their partner financial institutions and customers. Thirdly, as fintech-bank partnerships involve the processing and sharing of vast amounts of customer information, concerns regarding data security and privacy issues grow. Further, algorithms and other data-processing technologies are applied to conduct creditworthiness assessments of customers. Fintech firms risk extending loans to customers based on credit assessments that are inaccurate due to the input of biased data and a defective design of assessment technologies. Last but not the least, the risks that financial institutions face when outsourcing data security services and assessment are even greater due to the fact that a small number of fintech firms dominate the provision of such services. The operational failure of or cybersecurity incidents at dominant fintech firms can easily give rise to financial contagion and systemic events in the market.
In response, China’s government has endeavoured to address the above problems by strengthening laws in related areas, such as anti-monopoly law, data protection law and financial law. Specifically, antitrust regulators have issued guidelines for the platform economy to prevent monopolistic practices and safeguard customer interests. China has further consolidated its regulatory regime for data security and privacy protection to tighten oversight of fintech firms’ business. The formulation of industry standards for algorithmic applications has also improved compliance with requirements for financial innovations. These regulatory responses have both strengths and weaknesses. This paper focuses on the particular issue of regulatory arbitrage arising from outsourcing activities.
Our study suggests that in case of the co-lending business model, there is a regulatory loophole that allows some fintech firms to circumvent licensing requirements and carry out credit business in an indirect way. The loophole may be closed by clarifying that relevant requirements apply equally to indirect participation in co-lending business. In the loan facilitation model, under the current framework, fintech firms do not need to hold a credit business license but can rather ride along on the license of their partnering financial institutions. This gives rise to challenges since reliance is unduly placed on financial institutions who have to oversee their partnering fintech firms and are ultimately responsible for the performance of outsourced services.
Drawing upon the experiences of overseas jurisdictions, including the US, the UK, the Netherlands, Luxembourg and Switzerland, this paper argues that China can adopt a staged and differentiated approach to regulate fintech-bank partnership. The UK initiated the regulatory sandbox regime in November 2015, which allows fintech firms to develop and test innovative products and services in a controlled environment. It sets out plans for implementing the regulatory sandbox, including the entry and exit criteria, a tailored authorization process for different firms and appropriate safeguards for customers. A similar model, adjusted to local circumstances, would be suitable in China. As fintech firms need time and resources to meet relevant sandbox requirements, China may also create a special test environment for start-ups by introducing an umbrella regime. It allows fintech firms to conduct innovative business under the shelter of an umbrella entity. The sandbox umbrella, as a regulated entity, will provide ample experimental space and ensure better customer protection, because fintech firms can use its license for trial services and products under the actual circumstances.
After fintech firms complete the sandbox process and proceed to operation, the key issue becomes the continuous supervision of their partnership with financial institutions. Switzerland has introduced a new fintech license with relaxed requirements to promote innovation. The licensing process depends on the quality of each application and the complexity of the fintech business. Based on that model, China is advised to implement a sophisticated licensing regime to set out differentiated rules for fintech firms according to the nature and types of services they engage in. In this regard, more categories of special licenses can be created as ‘limited licenses’ as distinct from the traditional ‘full licenses’ to address the problem of regulatory arbitrage. Further, it is worth experimenting with a mentorship scheme, under which the monitoring responsibility of financial institutions is limited to compliance violations of their partnering fintech firm and emphasis is placed on helping start-ups.
The paperFinTech‑Bank Partnership in China’s Credit Market: Models, Risks and Regulatory Responses was published in European Business Organization Law Review. Robin Hui Huang 黃輝 is Chair Professor at the Faculty of Law, Chinese University of Hong Kong. Prior to joining CUHK, Professor Huang was a tenured staff member in the Faculty of Law at the University of New South Wales, where he now holds a position of Adjunct Professor. He is also Li Ka Shing Visiting Professor in McGill Law School and Honorary Professor at East China University of Political Science and Law. Christine Menglu Wang 汪夢露is a Post-doctoral Fellow in the Department of Law, the University of Hong Kong.
“Sign the (compensation) contract early, select a house early, improve early, benefit early” Largely proportional to the total number of administrative cases, most of the cases invoking the due process principle concern compensation claims for the expropriation of land and other coercive measures in the name of urban development. Photo by makzhou
While administrative law in China developed slowly, starting from the 1990s, the importance of administrative procedure law to fight corruption and foster society’s trust in the public administration became apparent. However, China’s legislation did not firmly establish the due process principle in the law. Rather, administrative law scholars as well as courts in China moved forward and developed the notion of due process. For instance, the Intermediate People’s Court of Suqian City in Jiangsu has in 2004 found that the local urban development bureau should have given inhabitants of buildings they demolished the chance to make statements and defend themselves, despite respective provisions being absent from the law. Meanwhile, legal scholars argue that due process is an unwritten general legal principle of administrative law.
Earlier investigations have pointed out that while judges have made use of due process in their adjudication work, such cases, even if designated representative by the SPC, do not suffice to fully establish the principle in administrative procedure law (Haibo He 2008). The post-2013 era in China is generally characterized by developments pointing to a regression of the rule of law. In this paper, administrative cases decided by Chinese courts from 2014 to 2019 are analysed to determine whether or not courts have further expanded the application of the due process principle. During that period, the High People’s Courts and the Supreme People’s Court published 321 decisions that mentioned the due process principle. About 70 percent of the court decisions dealt with rights relating to immovable property, including land use rights of state-owned land and the ownership of collectively owned land.
When an institution of higher learning makes a decision against a student who violates school rules and disciplines that affects his/her basic rights, it must allow the student to defend him/herself, and it must deliver the decision in a timely manner after it is made; otherwise, it will be deemed a violation of due process.
The due process principle finds its expression for instance in the famous case of student Tian Yong 田永, who was denied his graduation certificate by a university. Beijing Intermediate People’s Court decided in 1999 that the university’s decision was unlawful, arguing that due process was not being observed by the school. (指导案例38号，最高人民法院公报 2015 (8))
While a general administrative procedure law is absent at the national level, some laws such as the Administrative Penalty Law, the Administrative Enforcement Law and the Administrative Licensing Law include several due process requirements. The Administrative Penalty Law for instance, amended in 2021, includes the requirement for administrative agencies to notify in advance and consider any objections from persons against whom an administrative penalty is taken, among others. Some of the changes in the new Administrative Penalty Law were inspired by experimental legislation at the local level: Provincial legislators such as in Hunan (in 2008) and Jiangsu (in 2015) had already passed Administrative Procedure Regulations with a wide range of due process requirements. Apart from local legislation, policy documents adopted by the State Council emphasize the importance of due process rights and while they are not legally binding, do indicate a general trend for future legislation.
The study of court decisions undertaken here demonstrates that indeed, courts have continued to expand the application of due process after 2013. Due process rights are applied across different fields of substantive administrative law, and to different forms of administrative actions, including administrative penalty decisions as well as physical acts such as the demolishing of buildings. Courts however rarely elaborate on specific requirements the due process principle contains. Among others, notification rights, rights to a hearing and the right to ‘adequate participation’ for adressees of administrative acts have been held to be part of due process.
However, these developments are not always directed towards a general strengthening of administrative procedure to provide effective pre-judicial remedies. In several cases, courts use the reference to the due process principle as a catch-all clause for administrative injustices including for instance the requirement that belongings of former inhabitants of a building must be appropriately stored before demolition. Courts further do not always attach legal consequences, such as the revocation of the administrative act, where they find a violation of due process. We find that applying the due process principle helps courts avoid deciding on the substantive legality of the administrative acts in question, potentially interfering in the conflict between different administrative agencies.
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.
Confirmed keynote speakers at this year’s conference are Eva Pils, Professor of Law, King’s College London; and Teemu Ruskola, Professor of Law & Professor of East Asian Languages and Civilizations, Department of East Asian Languages and Civilizations and Professor of Law, Penn Carey Law School University of Pennsylvania.
This year, we invite submissions on legal issues relating to the topics below. Please note that submissions are not necessarily limited to the listed topics.
Legal Issues of EU-China Relations
China in the International Legal Order
Legal Culture, Legal Traditions and Rule of Law Development
Legal Aspects of the Belt and Road Initiative
Criminal Law and Criminal Procedure
Gender Equality in China
International Human Rights Protection and the Chinese Legal System
Chinese Law, COVID and the Emergency/Pandemic Preparedness
Chinese Policy and Presence in the Arctic
Sustainable Development and the Role of Regulation
Legal and Economic Issues of International Investment
Developments in Corporate and Commercial Law
Cyber Security, Data Privacy and Personal Information Protection
Artificial Intelligence and Ethics, Big Data and Intellectual Property Law
Social Credit and the Law, Judicial Reforms and Smart Courts
Labour Law Developments, Decent Work and Fundamental Labour Rights
Administrative Law and Administrative Procedure
China’s Environment, Climate Change and Air Pollution Laws and Policies
The conference invites submissions of paper abstracts and panel proposals by 19 March 2023, noting that all submissions will be peer-reviewed. Notification of acceptance will be given by 19 April 2023. Full papers should not exceed 8,000 words, and be submitted by 18 June 2023.
Abstracts should be limited to 300 words for a paper and panel proposals should be limited to 1,000 words for a panel session. The submissions should include: 1) the title of the paper or panel; 2) name, institution and email address of the author(s); 3) up to five keywords.
Young Scholars Roundtable
The conference welcomes abstracts and proposals from young researchers (PhD candidates, MA students, etc.). Young scholars’ sessions will be organized as roundtables to be moderated by senior researchers.
The headquarters of Tencent Holdings, which has seen several attempted mergers blocked by antitrust regulators in recent years. Photo by laboratoriolinux
Besides its significant role in international trade and investment flows as an economic powerhouse, China has also become an important jurisdiction in terms of competition law enforcement. While application of the Anti-Monopoly Law (AML) to commercial activities of domestic companies has important repercussions for their market conduct abroad, the enforcement of merger control directly affects multinational companies, which, due to their business presence in China, have to notify their mergers and acquisitions for clearance by China’s competition authorities.
Like numerous other jurisdictions, China applies its merger control to those transactions by multinational companies where the parties have substantial business presence on the Chinese markets expressed in terms of the realized turnover. It embraces the “effects doctrine”, meaning that it applies merger control extraterritorially “to monopolistic conducts outside the territory of the People’s Republic of China, which serve to eliminate or restrict competition on the domestic market of China.” As a result, even a merger of two foreign companies would have to obtain clearance from the Chinese competition authorities provided the turnover-based notification thresholds are reached.
In competition law scholarship, the narrative is strong that China’s merger control converges with that in Western jurisdictions, as it, too, applies economic analysis as a core basis for merger review and enhances procedural safeguards to protect the rights of the merging parties, increasing legal certainty of merger assessment. The Chinese merger control authorities have been frequently labelled as “young,” “unexperienced” or lacking necessary human resources to achieve a more technocratic enforcement of merger control rules. Despite the intentional choices of China’s legislators and regulators to design and implement its merger control regime with “Chinese characteristics”, Western academic literature is abound with hopes for further international convergence.
One of these “Chinese characteristics” was the initial distribution of the AML enforcement competences among three institutions: the National Development and Reform Commission (NDRC), the Ministry of Commerce (MOFCOM), and the State Administration for Industry and Commerce (SAIC). This distribution of AML enforcement powers renders China’s competition law system unique as in most jurisdictions, competition enforcement powers are entrusted to a single competition authority. The NDRC was authorized to enforce the AML against price-related anti-competitive practices, SAIC was responsible for prosecuting non-price-related infringements, while MOFCOM assumed the responsibility for merger control. Despite its extensive expertise on matters related to international trade and foreign investment, MOFCOM had considerably less knowledge and experience with the functioning of the Chinese domestic markets, compared to the other two anti-monopoly enforcement authorities. MOFCOM was relieved of its responsibility for enforcing merger control under the AML in 2018, when the State Council moved to centralize AML enforcement under a single institutional roof by establishing the State Administration of Market Regulation (SAMR). The Anti-Monopoly Bureau of the MOFCOM subsequently moved to SAMR. Finally, in 2021, China separated its competition authority into an independent Anti-Monopoly Bureau (AMB) that was elevated from the rank of a department within SAMR to a deputy ministerial-level agency. The AMB fully absorbed the merger control department of the SAMR.
While national competition authorities in many jurisdictions have to ensure that their merger decisions contain sufficient reasoning in order to allow for a meaningful judicial review, that is not the case in China. Practitioners frequently note the lack of transparency on the part of the MOFCOM and consider the published decisions of little instructive value for the legal and business strategies of the merging parties. The lack of clarity appears intentional since it increases the de facto discretion of the competition authorities in identifying their concerns and encourages merging parties to engage in negotiations to find the acceptable remedies. Furthermore, unlike other areas of AML enforcement, courts have virtually not played a role in clarifying merger control concepts. As a result, the interpretation of merger rules has been entirely in the hands of the enforcement authorities.
During 2008-2013, out of 750 notifications by AML enforcement agencies, only 57 (8%) concerned transactions involving exclusively domestic companies. This led to the impression that China’s competition authorities intentionally target foreign companies in their merger review. However, instead of focusing on whether China’s merger control deliberately discriminates foreign firms, it would be more relevant to discuss how effective or relevant merger review is for domestic enterprises. One of the reasons for the absence of domestic-to-domestic mergers from the “problematic” cases where mergers were prohibited or cleared with conditions has to do with China’s market structures. In those markets where there is no monopolistic or dominant state-owned enterprise (SOE), the market shares of the parties tend to be rather small, concentration ratios are relatively low, and intended concentrations won’t have significant effects on competition. Due to their importance for the Chinese economy, although the consolidations of the Chinese SOEs were regarded as concentrations of undertakings and fell within the scope of merger control, once the government announces the reorganization of the relevant SOEs, the respective merger clearance of MOFCOM/SAMR remained a formality. While several high-profile SOE mergers passed the merger review, there are numerous instances where SOEs have omitted to submit their merger notifications and were fined with a penalty of up to CNY 500,000. This fine however is unlikely to serve as a sufficient deterrence. Therefore, although formally the merger control rules under the AML are applicable to foreign and domestic companies alike, the merger review was used more assertively in relation to foreign companies as such entities are not state-owned or regulated by means which the Chinese authorities normally use in relation to domestic market players.
Our study of China’s merger control enforcement is based primarily on conditional clearances and prohibition decisions since the AML does not require publication of unconditional clearances. Attempts to screen conditional merger decisions for factors that have been actually considered by MOFCOM/SAMR during the merger assessment process produced only anecdotal evidence. On the other hand, the formulation of merger remedies can serve as a litmus test for assessing the convergence, or lack thereof, between the Western-style, primarily economics-based merger control regimes and China’s sui generis merger control system.
It was widely noted that the most apparent divergence with Western jurisdictions consists in China’s competition authorities’ preference for behavioural remedies. Unlike the structural remedies that preserve market structures by separating certain business units from the control of the merging parties (mainly through divestitures), behavioural remedies allow the competition authorities to shape the specific commercial practices (price levels, sales volumes, market expansions, supply to certain customers, etc.) of the merging parties even after the merger is completed. Behavioural remedies (purely behavioural remedies) were imposed in 40% of cases and hybrid (structural and behavioural) remedies in 25% of cases. The maintenance of behavioural remedies represents a significant interference in the merging parties’ business activities.
For example, in the 2014 Microsoft/Nokia case, MOFCOM used behavioural remedies to ensure that the standard essential patents held by the merging parties would be licensed on FRAND (fair, reasonable, and non-discriminatory) terms. The competition authority has justified its decision by the prevention of possible abuses of patents that may occur post-merger. In another 2014 case, Thermo Fisher/Lifei, the acquiring company was required to lower the China market list prices for its products in the next ten years and not to reduce the discount offered to Chinese customers. Another example of a behavioural remedy is the requirement to notify and ask for permission the competition authority in China about any further expansion of the merging parties’ business.
The present study of China’s merger control legislation and enforcement records demonstrates that while formally following the widely accepted competition harm theories, the significant discretion of the merger control authorities results in a limited degree of predictability in merger assessment. With regard to the nationality of the merging parties subjected to prohibitions or imposition of remedies, enforcement statistics suggest that China’s merger control enforcement is applied more assertively in relation to foreign companies.
Definition by Chenchen Zhang (2017). Censorship on the Chinese internet often stops short of regulating the slander of those labelled as Baizuo.
Hate speech has almost never been a major legal issue in China. It is not until very recently that the need to regulate online hate speech as a criminal offence attracted more attention from legal scholars. On the plane of governance, the problem of potential tensions between different nationalities, religions, genders and perhaps regions is a politically sensitive item, albeit far from being the most sensitive one that triggers the nerve of the ruling party. In most cases, such potential tensions are glossed over either by the work of the “United Front” or by media censorship. Due to the prevalence of the authoritarian, Confucianist, and Great-Han culture, those tensions are likewise often ignored by many ordinary Chinese: in their eyes, such issues range from being petty and unimportant to non-existent. After all, highlighting those issues marks profound deviation from a “harmonious” society in Confucianist illusion.
Yet those tensions do exist as in any other society. And speech expressive of hatred and resentment of anything in those categories is ubiquitous in China – online or offline. The reason why hate speech is neither a legally defined term nor anywhere properly regulated in Chinese law is that hate speech is simply ranked very low among various types of political speech in a highly authoritarian system of speech regulation. Where political speech lacks real constitutional protection, hate speech will not even be recognised as such. However, speech regulation is real and, by its very definition, hate speech does fall sometimes into the purview of such regulation. One of the main legal sources that captures hate speech regulation is China’s Criminal Code (Arts. 249 & 250). Other recent sources include numerous administrative regulations on publication as well as the new Civil Code (Art. 1183).
The reason why hate speech is neither a legally defined term nor anywhere properly regulated in Chinese law is that hate speech is simply ranked very low among various types of political speech in a highly authoritarian system of speech regulation.
Importantly, this emerging patchwork of hate speech regulation looms large amid a bunch of new online hate speech regulations in liberal democracies, where the constitutional protection of free speech is sacrosanct but may be circumscribed by equally important priorities. The constitutional and legal contours of speech protection and regulation, however, are at variance among those countries, and distinctly so between the US and Europe. At any rate, equality concerns are a rising factor that could puzzle even lawmakers and courts when it comes to a potential conflict between freedom and equality. So far the regulation of online hate speech has been a topic of controversy among politicians, lawyers, activists and media. While many are zealous followers of, say, minority protection and gender equality, others cast doubt on the overemphasis on equality-related considerations that could buttress authoritarians’ “benevolent violation” of personal freedom – here, in particular, freedom of expression.
Thus, it is highly interesting to look into the regulatory area of online hate speech through a comparative lens. Can those rising equalitarian considerations in the constitutional regulation of hate speech lend a hand to an authoritarian regime in legitimising its legal technique of restricting political speech in a more nuanced, less noticeable manner? At least, the notice and takedown regime is highly identical to that in western hate speech laws such as the German Network Enforcement Act (‘NetzDG’). But there are more advanced restrictive measures of political speech such as a manipulated campaign of unleashing hateful speech against liberalism itself. A leading example is the online, public disparagement of “White Left” (baizuo) which has had impingement on any liberal-minded speakers that may articulate their criticism of the mainstream ideologies or governance models.
This paper explores this unique pattern of regulating online hate speech in alignment with the prevailing regulatory framework in Europe and the US. The paper analyses the emerging regulatory patchwork of hate speech regulation in China which builds on the regulation of political speech in China and addresses the ways in which European and US approaches have informed Chinese law, though the latter are used in different ways within an authoritarian constitutional order characterised by demoralised pragmatism and interest-driven administrative law. The paper develops a case study of the disregulation of “white-left” commentators (deemed to represent Western liberalism), which raises questions about the connection between support for particular modes of regulation against the background of a particular political system, with differing roles for the state, private actors, and media organisations.
The paper “How equalitarian regulation of online hate speech turns authoritarian: a Chinese perspective” was published in the Journal of Media Law. Ge Chen is Assistant Professor in Global Media & Information Law at Durham Law School. His main research interest is free speech in international and comparative perspectives. He was postdoctoral research associate and remains associate of the Centre for Intellectual Property and Information Law at the University of Cambridge. He was resident fellow (Fulbright nominee) and remains affiliated fellow of the Information Society Project at Yale Law School. He was Visiting Academic of the Programme for Comparative Media Law and Policy at the University of Oxford. He is the author of Copyright and International Negotiations: An Engine of Free Expression in China? (CUP 2017), a research monograph featured in Harvard Law Review.
The 1954 Constitution was drafted under the leadership of Mao Zedong in this house near the West Lake in Hangzhou. Today it hosts China’s first Constitution-themed museum and is a popular “red tourism” destination. Photo by Siyuwj, licensed under CC BY-SA 4.0
The Constitution in the People’s Republic of China (the PRC or China) has experienced a modern revival under the Xi administration. Both the Communist Party of China (the CCP or the Party) and state leaders have called upon the nation to rely upon the guiding force of the Constitution and its laws in recent years and to adopt Xi Jinping Thought on the Rule of Law (习近平法治思想) in enforcing legal mandates. However, it is also clear that this new emphasis on constitutional law – and by extension, constitutionalism – excludes some of the ideas traditionally associated with a constitutionalist state.
Core facets of constitutionalism, including judicial independence and the separation of powers, are notably absent in its new and contextualised version in China. This is best represented in the adoption of the 2018 Constitutional amendments, which eliminated term limits for the state’s highest offices (one of few procedural limitations consistently enforced by China’s leadership), equated the ‘leadership of the Communist Party of China’ with the founding ideology of the nation, and further blurred the boundaries between Party and state governance. Now, it seems China’s leadership has embraced a political-style constitutionalism that relies on the leadership of the Party as the real or ‘living constitution’ of the nation.
Adopting a historical perspective, this paper analyses the development and progressive implementation of China’s four constitutions, using three interrelated frames – ideology, text, and judicial implementation – as a metric for determining how the theoretical footholds of this new ‘constitutionalism’ within China developed over time.
This work begins with an overview of the competing legal philosophies that influenced dynastic China and preceded the development of the state’s first constitution. Two polarised conceptions of law predominated – Confucianism, which emphasizes social rules and the maintenance of harmony, and Legalism, an ideology that presupposes humankind to be cruel and generally unlawful. Whereas Confucianism would eschew formal institutions for the resolution of conflict as disruptive to social order, Legalists preferred a strong administration, detailed edicts and harsh penalties for violations of the law. Both philosophies, though seemingly contrary, continue to exert great influence on governance in modern China; for example, Xi Jinping is well known to cite the Confucian classics in his speeches, while encouraging the development of a ‘legalistic’ administration.
The form and content of most of these documents traced the historical political trajectory of the state. The 1954 Constitution, for instance, was a product of the Communist Party’s victory in the Chinese civil war and the nation’s then-strong alliance with the USSR. The text supported the supremacy of the vanguard party and included a stronger program for collective entitlements and responsibilities of citizens. In terms of judicial enforcement, this text was explicitly excluded from the courtroom in a communication from the nation’s highest court (the Supreme People’s Court) to a lower court, in confirming that the Constitution could not be cited in criminal matters.
The short-lived 1975 Constitution reflected a turn within the Mao Zedong era – the Cultural Revolution, a national movement which endeavoured to ‘cleanse’ the nation of its traditionalist past and Western influence to form a new Communist revolution for its people. Alongside many of the nation’s historical relics, the legal system was fundamentally hollowed out during this time as lawyers and judges were detained, disappeared and sent to labour camps or re-education facilities. Judges held court on limited matters, primarily on divorces or important criminal cases. In many ways, China is still recovering from this generational loss of its legal profession. In its text, the Constitution reserved absolute authority for the CCP. While different branches of the government were maintained, all were required to express deference to the Party. Rights were also condensed to merely four articles, leaving little room for enforcement. Fundamentally, the 1975 Constitution represented a legitimation of the power already subsumed by the Communist Party and proved to be an unsustainable model that was reformed upon Mao’s descent from power.
The 1978 Constitution was also transitional – taking the state out of the Cultural Revolution and paving a path for the modern era. This text was an amalgamation of elements originating from the 1954 draft and its immediate predecessor; it once more expanded the number of constitutional rights, while also maintaining the structure of deference to the Party. Ultimately, reformists within the state resistance were successful in calling for a new text in 1982 that reflected the contemporary era of constitution building and economic globalisation. This current Constitution in many ways mirrors the common programs of democratic nations. It includes traditional principles of a constitutionalist state, like judicial independence and provisions for the separation of powers. It also adopts a robust commitment to rights, improved by the 2004 amendments’ addition of an explicit state obligation to respect human rights.
Since its adoption, the Constitution has been amended five times, and most subsequent modifications brought China closer to constitutionalism in its organic sense. In 2001, the Constitution was judicialized for the first time when the nation’s highest court relied on the text to vindicate a plaintiff’s constitutional right to education (though this ruling was later vacated).
However, the 2018 amendments brought the state’s Constitution reformation period to an abrupt halt, introducing a ‘New Era’ of constitutionalism with old roots. As a result, this historical perspective is particularly relevant and instructive in today’s China. Human rights and traditional constitutionalist principles within China’s Constitutional text now seem to rival the revived citizen obligations and commitment to Party leadership of the Mao period. These developments are not incidental but represent an intentional reversion to specific historical mandates.
With precepts found in the dynastic and Communist states, this constitutionalism appeals to several key elements of China’s constitutional past. Intentional efforts from the Party to create law ‘suitable for China’ tend to focus on constitutional language from the Mao era, which laid precedent in situating the Party at the helm of the Constitution. Constitutional concepts such as Mao’s People’s Democratic Dictatorship, or the idea that China is a democracy for its friends and a dictatorship for its enemies, have generated fresh debates within state media and domestic literature. Moreover, the state’s efforts towards administrative centralization have echoed within China’s legalist traditions. Taken together, it is clear that the PRC’s legal history plays a newly significant role in the present.
While China’s constitutional future remains unclear, the modern revival of these elements and others signifies a departure from its era of reform. However, many protest a return to the past. While suppression of dissent has become commonplace, activists nevertheless persist in advocating to vitalize their constitutional rights. As resistance efforts continue, it may be that this New Era of constitutionalism has the same transitional nature as its predecessors.
The paper The Evolution of Constitutionalism in the People’s Republic of China: Past and Present was published with the Indiana International and Comparative Law Review.Leigha Cout is a William H. Hastie Fellow at the University of Wisconsin Law School, a PhD Candidate in Law at King’s College London and a Research Associate with the China, Law and Development Research Project at Oxford University. Her current research focuses on constitutional law and change in the People’s Republic of China.
