China in Preparation for the World Trade Organization Entry - Essay Example

Chinese Business Law Introduction Being the leading country in population as well as having one of the fastest-growing economies, china is a nation that ought to be closely followed when it comes to business economy. With the accession of china to the World Trade Organization (WTO) in 2001, China has been witnessing an increased rate of introduction of laws, particularly, related to business (ECOVIS 2014). EU SME (2013) contends that since china took up the task of developing a ‘socialist legal system containing Chinese characteristics,’ the amount of laws in the country have been breathtaking. Despite the fact that most of these laws are poorly implemented and enforced, those concerned with international business cooperation and trade are relatively clear and well applied. There is also evidence showing that after the 2003 leadership succession in china, from the third generation to the fourth generation, there was a launch of a new wave of economic legislation to advance the economic reform as well as reforming and building up the legal reforms in the country. The key driving factor to the new economic laws in china is attributed to the requirements of the world trade organization (WTO). Being part of the membership of the WTO, China has an obligation to meet the rules and regulations as stipulated under the penal code of the WTO (ECOVIS 2014). The most pressing rules and regulations that each member of the WTO is obliged to implement are concerned with the governance of trade as well as those related with other economic activities. As a result, its entry into the WTO, China has since strived to implement its business law to conform to the agreement with the WTO to meet its international obligations. This essay will attempt to critically discuss how China’s accession to the WTO in 2001 has reshaped its legal environment on the business regulation. 2. China in Preparation to WTO Entry In preparing to join the WTO, china initiated the overall process of reviewing its existing laws and regulations. Slightly either before the year 2000 ended, most of the administrative measures and the state council or ministries annulled regulations. Right from the time China became the member of the WTO, it has hastened its activities of revising its current laws and regulations. according to available literature reviews, china had by the year 2002 revised 37 administrative regulations and 14 laws, annulled a total of 12 administrative regulations, changed about 1,000 departmental rules and measures, and suspended a total of 34 relevant documents. At the time being, china had to timely adopt the new laws to cope with the changing economic situation. In this scenario of legal changes, it is argued out by Richter (2000) that the new leadership in china did not initiate them, but they were already scheduled to be in place and in accordance with the needs of the WTO. As seen in these developments, it important that the idea of the rule of law has been slowly been integrated into the Chinese culture. More interestingly, the 1999 Chinese constitutional amendments are credited to having played a big role in the overall economic legal reform. The need to implement regulations and laws for the initiation of the market economy in china is one of the most dynamic driving forces that cannot be assumed (Kim 2002). Since 1991, china has been witnessing a further development of economic reform, and due to its increased involvement in the international organizations, economic legislation has been expanded to take care of the economic fields such as insurance, company law, inter alia, securities, anti-dumping, intellectual property and telecommunications. Since the accession to the WTO, economic reform has been at the forefront and has emerged as the most developed branch in the present Chinese legal system. According to available statistics, both the seventh NPC as well as its Standing Committee introduced more than 80 decisions and laws on legal issues (Kim 2002). A quarter of these laws and decisions on legal issues were concerned with the economy. On the other hand, one third of the 117 laws and decisions enacted by the eighth NPC were related to the economy. From the start of year 1979 to the end of the year 2002, a two third of the 304 laws adopted by the NPC were related to economic development. For instance, the province of Jiangsu adopted 76 economic laws and regulations between 1993 and 1997. 3. Legal Environment on Business Regulation after Accession to the WTO 3.1. Banking Laws Importantly, there has been three major banking laws revised in the recent or perhaps been adopted by the NPC. In 1995, china enacted the people’s bank law as well as the commercial bank law. Nevertheless, after the accession of china to the WTO, plus its commitment to fulfilling the obligations of the WTO, the two existing laws had to be revised (Jones 2009). This revision is regarded as part of the legal banking reform brought about by the accession of china to the WTO in 2001. 3.1.1. Banking Regulatory Commission (BRC) The establishment of the banking regulatory commission (BRC) in 3003 is the most remarkable development in the banking system reform in accordance with the decision the NPC Standing Committee adopted. One of the major purposes of the BRC is to handle the issue of bad loans, which have over time led to high financial risks that ought to be avoided and prevented. The responsibility of the BRC is to prepare the supervisory measures for financial institutions in the sector of banking, examining and approving the scope and change of businesses and purposes of the financial institutions in the banking industry, preparing relevant administrative regulations, supervising the above-mentioned institutions and dealing with lawbreakers (Yang 2003). Based on the data from the law on banking, the BRC is mandated to request the financial institutions in the banking industry to submit relevant materials. These relevant materials are necessary in taking measures during the inspections processes, to take over the banking financial institutions, which dealt harm to the public interest and financial order. It is clear that china has adopted into its law the key principles for efficient banking and supervision that were enacted by the Basel Committee on banking supervision. Currently, the people’s bank requires revision for two main reasons: In order to enable the people’s bank to co-operate and co-ordinate with the newly created BRC, and to harmonize with the requirements of WTO (Yingjie 2008). Originally, the power of the banking supervision that was assumed by the RBC was within the competence of the people’s bank and as provided in the 1995 people’s bank law. However, after the establishment of the BRC, there was need for the relevant banking provisions to be changed. As per the provisions of the revised law, the people’s bank will not be mandated with the overall supervisory role, but they will be responsible to prepare and carry out currency policy for controlling and preventing financial risks, for improving operational rules and regulations for financial institutions as a central bank (Yingjie 2008). Nevertheless, while some of the supervisory powers of the people’s bank have been transferred to the BRC, the people bank has remained with such power in six areas that include the inter-banking markets, settlement and payment rules, working together with the RBC, and many more others. 3.1.2. Commercial Bank Law Part of the Chinese legal business law that has been enacted is the commercial bank law. This law has since 2001 been revised accordingly to be in consistent with the provisions of the WTO. Under this commercial law, all commercial banks are responsible to the BRC. On the same note, the business operation of the BRC is enlarged (Yang 2003). The commercial bank law also deleted the provision on the awarding of government loans under the instructions of the government. This law also did away with the provision of prohibiting commercial banks from investing their money in non-financial institutions as well as enterprises within china. Finally, the commercial bank law strengthened the punishment of illegal activities. 3.2. Other Important Laws 3.1. Law on Securities The law on securities is another law related to banking that was revised by the NPC. Yang (2003) observes that this law required a relatively big surgery because it involved quite a number of controversial issues. Some of these controversial issues include, whether funds from the banks can be traded in the stock market or not. After a long sequence of deliberations, the NPC finally in 2005 amended the law on securities (Stegemann 2000). The changes are quite a number of them. They include the provision of a legal basis that would allow commercial banks to invest their money in the stock market through the establishment of the fund management companies as well as other relevant companies; the expansion of the scope of stock; and the strengthening of the risk control and guaranteeing of the safety of the assets of clients. 3.2. Decision on some Issues of Handling Administrative Cases Related to International Trade Introduced by the Supreme Court, Decision on Certain Issues of Handling Cases of international Trade came into practice in 2002. This regulation is particularly meaningful to the handling of international trade. In particular, this law it is one of its kind when it comes to handling trade cases as enshrined in the provisions of the WTO. This law provides the principles of national treatment and reciprocity. Perl (2015) points out that under article 10 of this law, there is a provision in which foreigners and foreign entities are provided with the same litigation just as the Chinese people. On the same note, foreigners without any form of discrimination also enjoy litigation related to international trade. Nevertheless, if a foreign nation happens to discriminate a Chinese in respect of the same right, in this incidence the principle of reciprocity will have to apply. China does not apply the WTO regulations directly within the Chinese territory. Instead, china implements such regulations by WTO via its domestic legal procedure by revising and adopting relevant laws (DArcy & Xia 2003). It this case, the general rule applies to the proceedings of court. For instance, the court is not allowed to use directly the WTO regulations as the basis for judicial decisions, nor any individual or perhaps an enterprise is not allowed to directly invoke the WTO regulations while taking or defending proceedings (Perl 2015). Though these regulations reflect the general rule, they nevertheless provide that when relevant provisions of a domestic applicable law have more than just two different interpretations. 3.3. Judicial Review In fact, it is evident that the regulation embodies the required judicial review by the WTO law .in the Chinese legal framework, the judicial review refers to the administrative trial and administrative litigation. This new law requires seven aspects to be considered by the relevant courts: whether regulations and laws are applied correctly, whether the evidence is adequate and genuine, whether there is a bleach in statutory procedure, whether there is abuse of power, whether there is ultra wires, whether administrative punishment is unfair; and finally, whether the delay or failure in performing statutory duties. These regulations enhance Chinese courts to effectively supervise the conduct of the governmental organizations that are involved in international trade administration. Nevertheless, it should be noted that such kind of judicial review of administrative acts is only limited to handling cases that are related to international trade. 3.3. Law on Administrative Licensing The law on administrative licensing is another significant law that is applied to the development of the market economy. This law was adopted in the year 2003, and has since been in operation. Economic licensing is very vital when it comes to the field of economy, public health, ecological environmental protection, macro-economic adjustment and control, and the development of and the utilization of the limited natural resources. Under this provision, any regulation on administrative licensing must be published, and if not, it can be a foundation upon which administrative licensing can be granted (Stegemann 2000). To prevent incidences of localism, the law specifically requires any administrative licensing at a specific locality to be free to individuals and enterprises from other regions to produce goods and provide services. On the same note, this provision should not restrict the access of commodities from other parts of the world to entering the local market. 4. Discussion As observed in the above general survey, it is evident that since the accession of china to WTO it has made a quite remarkable achievement in the economic legislation in reconstructing and d developing its legal system. Nevertheless, the Chinese legal system is not complete and it requires further development. Perl (2015) observes that for a legal system, quality is regarded to be more significant than quantity. The presence of a large amount of legislation is not necessarily a true picture of the development of the Chinese legal system. In fact, china witnesses a myriad of problems in both legislation and reinforcement (Stegemann 2000). A legislation process requires transparency for a proper adoption of good laws. Interestingly, China has in the recent times begun a process of soliciting ideas from relevant stakeholders in readiness of for the about to be enacted draft law. This principle of transparency requires all members of the WTO to publicise all of their policies and laws in relation to trade. Since the accession of China to the WTO, it has been difficult for China to continue using quite a large number of normative documents in the governance of economic operations. When needed, the current documents in line with the regulations of the WTO are enacted into laws. As observed in the paper, previously there was no clear-cut status of property ownership and right in china. The relevant regulations in the Chinese constitution are merely ambivalent, as they only hold that in the primary stage of socialism, the state has a mandate to uphold the basic economic system (Perl2015). This scenario ensures that the common development of the economy belongs to a diversified form of ownership. Nevertheless, the fourth amendment of the constitution has somehow remedied this scenario by emphasizing the case of inviolability of legally owned private property. Up to now, it is still clear that the property rights lack a legal protection. It is widely expected that more cases, mostly those involving foreign elements will flood in the courts after china entered into the WTO. China is a country mainly characterized by corruption. Kwock, James and Tsui (2013) observe that the culture of Guanxi is deeply entrenched, and this is what is dominating most economic transactions. In the transitional period, from planned to market economy, there has widespread cases of corruption. Though there have been efforts to combat these cases of corruption, it is clear that there is still traces of quite a significant amount of corruption taking place in most economic transactions (Keyuan n.d,). Further, localism is evident in the legislation of regulations concerning economic matters. Because interests exist in the transitional period from the past economic system to the new, there is likelihood that local interests would be protected by the local legislation. 5. Conclusion Conclusively, china has had a very long history when it comes to economic laws. It is evident in the paper that the country has been facing rampant cases of corruption, and thus impeding any efforts put forward to the implementation of new rules and regulation. Nevertheless, since the entry of china to the WTO in the year 2001, the country has made a major stride in the legislation of economic laws to comply with the requirements of the WTO. Various business laws have since been enacted by the state. Laws related to the banking system have since been streamlined in accordance with the requirements of the WTO. There have been also efforts in china to streamlining other important laws related to business in the country. However, there have been problems in effectively implementing and enforcing some of these laws; it is evident that most of them were enacted because of the accession of china to the WTO in the year 2001. However, the status of this business law will be requiring a matter of time to determine whether they would hold any water as the country does not enjoy one of the best corruption-free environment. References DArcy, S, & Xia, H 2003, Insurance and Chinas Entry Into the WTO, Risk Management & Insurance Review, 6, 1, pp. 7-25. EU SME 2013, An Introduction to Business Laws in China, viewed 4th may 2015, . ECOVIS 2014, Doing Business in China Guide, viewed 4th may 2015, Jones, K 2009, The Political Economy Of WTO Accession: The Unfinished Business Of Universal Membership, World Trade Review, 8, 2, pp. 279-314. Kim, I 2002, Accession into the WTO: External Pressure for Internal Reforms in China, Journal of Contemporary China, 11, 32, pp. 433-458. Kwock, B, James, M, & Tsui, A 2013, Doing Business in China: What is the Use of Having a Contract? The Rule of Law and Guanxi when Doing Business in China, Journal Of Business Studies Quarterly, 4, 4, pp. 56-67. Keyuan, Z n.d, Revamping Laws for the Market Economy in the Post-WTO China, viewed 4th may 2015, . Perl, SM 2015, is Chinas Legal Reform Good for Business and Invoice Factoring?’ Secured Lender, 71, 2, pp. 30-33. Richter, F 2000, Chinas Entry into the WTO and the Impact on Western Firms, China Economic Review (1043951X), 11, 4, p. 423. Stegemann, K 2000, The Integration of Intellectual Property Rights into the WTO System, World Economy, 23, 9, p. 1237. Yang, D 2003, Chinas Joining the WTO and Educational Reform and Development, Chinese Education & Society, 36, 5, pp. 12-21. Yingjie, G 2008, Domestic Openness in Post-WTO China: Central and Local Perspectives, Journal of Contemporary China, 17, 55, pp. 339-359. Read More