1

Role of law in planned economy

• In general theory, law underpins private economic activity– Secures property rights– Underpins contracting

• In China under Mao, ideology more than law– Ideological controls– Chaos of Cultural Revolution (1966-1976)

• In China of the early reform period, new role for law– Bring regularity to government operations– Indicate policy direction– Regulating operation of state-run enterprises– Ex: Bankruptcy Law (1986)

• "[t]he threat of bankruptcy urges all enterprises and people on and will turn muddleheaded people into shrewd ones and lazy people into diligent ones" (Hu, 1986)

• i.e. general policy direction• Could bring court proceedings, but bankruptcy process really

under control of ministries—not courts

2

Role of law in transition from plan to market

• Reduce role of decision making by bureaucrats

• Increase role of universal rules

• Linked to emergence of private enterprises

• Later linked to privatization of public ent’s– No bureaucratic superior

• Explosion of economic legislation by NPC

3

Role of law in transition from plan to market

• Note China— “growing out of the plan” NOT “big bang”

• Co-evolution of economy and law

• But nothing inevitable

4

Role of law in transition from plan to market

• Role of foreign trade and investment• Initially, special, separate legal system for

foreigners – 1979 Equity Joint Venture Law

• Note actually “law” promulgated by NPC • Contrast domestic private sector (stay tuned)

– corporate income tax

• Now legal regime for Chinese entities more like that for foreigners

5

How Laws are Made

• Daniel Berman—landmark study:

How a “Bill Becomes a Law”

• “policy-making processes have an enormous impact on the content of the laws they produce and are not mere ‘technical devices’ designed to permit orderly Congressional lawmaking (Tanner 1995:39).”

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5 stages of law making

• Agenda setting

• Inter-agency review

• Top leadership approval

• NPC debate and passage

• Implementation

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3 arenas of law/rule making

• State Council

• Communist Party central apparatus

• National People’s Congress & St. Comm.– Legislative Affairs Commission

8

Hierarchy of Authoritative Doc’s

• Sources:– Constitution (1982)– Law on Legislation (2000)– State Council Regulations on the Procedure

for Enactment of Administrative Regulations (2001)

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Enactments with the formal status of law—in the sense of being enforceable by courts

• Constitution xianfa 宪法• National People’s Congress & Standing

Committee statutes/laws falü 法律• State Council administrative regulations

xingzheng fagui 行政法规• Provincial-level people’s congresses local

regulations difangxing fagui 地方性法规

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Enactments without the formal status of law—not technically enforceable by courts

• Government ministries and sub-provincial governments “tertiary rules” guizhang 规章

• Courts may “refer” to tertiary rules if they do not clearly conflict with higher-level rules (ALL 1989)

• These are “Normative Documents” as opposed to rules in language used in Peerenboom

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Hierarchy of Authoritative Doc’s

• Problems– No good system for authoritatively resolving conflicts

between different rules– Technically,

• Constitution• Law on Legislation

– NPC, Standing Committee• May review and invalidate legislation passed by lower-level

bodies• NPC not known to have overturned a single administrative or

local regulation (Chen 2004:114)

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Hierarchy of Authoritative Doc’s

• Problems (continued) – Courts

• not allowed to play role of resolving conflicts of law/rules

• Not allowed to invalidate legislation• Can only either appeal to higher legislative body or

apply lower-level rule

– In practice, local governments dominate• Regulations passed by lower-level governments

often trump superior regulations

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How are rules made in the domestic political economy? Ex: Private enterprise

• 1981 State Council provisions for urban individual household firms getihu (7 employees)

• 1983 Central Party Document #1 extends these provisions to rural areas

• 1986 Zhejiang Provincial Party Committee “Request for Instructions regarding Establishment of the Wenzhou Experimental Zone” to CCP Central Committee and State Council

• 1987 Central Party Document #5 justifies greater role for private enterprise

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Ex: Private enterprise (continued)

• 1987 13th Party Congress “primary stage of socialism”

• 1988 National People’s Congress revises Constitution to recognize legitimacy of private enterprise

• 1988 State Council “Provisional Regulations on Private Enterprises”

• 1997 15th Party Congress “private sector important part of economy”

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Ex: Private enterprise (continued)

• 1999 NPC revised Constitution Article 11 “The country should protect the legitimate rights and interests of the self employed and private enterprises… and exercise guidance, supervision, management…”

• 2001 CCP admits private enterpreneurs as party members

• 2004 NPC revises Constitution “non-publicly-owned sector encouraged”

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Example of how to show something’s urgent and important

• In 2007, the State Council initiated a nationwide campaign focusing on what it regarded as the two most common and serious types of land disputes: violations of land contracting rights and illegal land takings.

• State Council/Seven Ministry-Commission Notice Regarding Launch of Specific Governance [Procedures] Nationwide for Prominent Rural Land Problems, June 10, 2007.

• In addition to the State Council, the other leading agencies include the – Ministry of Agriculture, – Ministry of Land and Resources, – Ministry of Supervision, – Ministry of Civil Affairs, – CCP Leading Group for Rural Work, the – State Council Office for Rectification, and the – State Bureau for Letters and Visits.

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Workshop: Legislative drafting process

• Labor Contract Law—2 groups

• Property Law—2 groups