When describing the Chinese politico-legal system, Western commentators naturally compare and contrast it with Western legal systems. The Chinese politico-legal system, however, has enough differences that the Western observer is often unable to understand how the Chinese system actually works. Furthermore, many Western observers are left with the impression that because the Chinese system is so different from Western law that the entire Chinese system must be unfair and incapable of producing economic prosperity. One commonly held belief in the West, for example, is that investment will be limited if law does not provide strong property rights. Empirical evidence, however, suggests that the Chinese system produces economic growth and is generally fair.
Most Western observers are unable to understand the Chinese politico-legal system by comparing it to Western politico-legal systems; therefore, this blog suggests that a different conceptual model may improve understanding of China’s politico-legal system. Specifically, this blog hypothesizes that Western observers would be benefit by thinking of the Chinese politico-legal system as similar to a large, Western-style corporation.
Viewing the Chinese system as a corporation is advantageous to the Western observer for at least two reasons. First, it makes it easier to understand the dynamics and values of the Chinese system. Since the differences between how a corporation operates and how the Chinese system operates are so small, this model should help Western thinkers to analogically anchor their analysis of Chinese law.
Second, many Westerners believe that the Chinese system lacks any normative value. They argue that current economic gains are illusory and any appearance of fairness is farcical–they believe the system is inherently unfair and will certainly lead to an economic crisis. When one views the Chinese system through the lens of Western political and legal theories, it is logical to conclude that they are right. The Chinese system lacks so many features that Western jurisprudence considers essential (such as an independent judiciary), that it is natural for the Western thinker to conclude that the Chinese system is defective and normatively undesirable.
Corporations, however, generally enjoy a positive reputation in the West. Furthermore, Western commentators are familiar with the organization, values, and dynamics of corporations. Analogically anchoring the Chinese politico-legal system will make it easier for Western observers to understand what aspects of the Chinese system might be fair and which aspects might contribute to economic growth.
This blog merely sketches the hypothesis that the Chinese politico-legal system is similar to a large, Western-style corporation. To present the hypothesis, it reexamines two prior observations of the Chinese system and compares the observations to corporations. It also examines some general aspects of the political structure to show how it is similar to corporations.
Conceptualizing Chinese statutes and rules as corporate directives
Peter Corne states that Chinese “legal drafting is characterized by the following:
- principle-like pronouncements
- vagueness and ambiguity
- undefined terms
- broadly worded discretions
- omissions
- general catch-all clauses”
Peter Howard Corne, Foreign Investment in China: The Administrative Legal System 95 (1997).
The six characteristics of drafting above lead to two aspects of Chinese law: 1) the laws are progressively refined as they descend through the levels of government, and 2) authorities implementing the vague laws have broad discretion.
National laws are generally the most broad and vague in China, and the legal rules are refined as other authorities implement them. When the National People’s Congress makes a law, it is typically implemented by other, inferior, government entities–provincial governments, administrative agencies, the procurate, and other entities. Those entities sometimes delegate their rule-making power to yet other sub-ordinate entities. As each level of government delegates implementing and rule making authority to lower levels, the rules are typically refined and made less vague. Nevertheless, the final rules tend to be much more general and vague than laws in Western legal systems. See Li Yuwen & Jan-Michael Otto, Central and Local Law Making: Studying China’s Experience 22, in China’s Legal Reforms and Their Potential Limits (Edward B Vermeer & Ingrid d’Hooghe eds., 2002).
Because the final rules are still vague and general, the implementing authority, and often the actual officials implementing the rule, has broad discretion. The discretion of the implementing authority is so broad that the implementing authority can often break its own rules when making decisions: Corne states, “Even fairly detailed rules are . . . often subject to overriding ministerial or departmental discretion.” The power of a regulatory body to change regulations ad hoc and ex post facto is virtually unheard of in Western legal systems, and most Western legal thinkers likely consider it incompatible with a functioning legal system.
These two aspects of Chinese law, refinement of legal rules and broad discretion for officials, are similar to two major aspects of corporations: refinement of corporate directives and broad discretion for corporate managers.
First, corporate directives are quite similar to Chinese legal rules. Executives announce “strategic” goals in vague and broad terms; middle managers refine those strategic goals into general “operational” plans; and front-line managers use those operational plans to make “tactical” decisions. At all levels of the corporation, rules and directives are vague and general; nevertheless, the corporate bureaucracy functions and implements the strategic goals announced by the company’s leadership. (Also see this explanation by Venkat.)
Second, the corporate departments and employees that actually implement corporate directives have broad discretion about how to implement those rules. The corporate world refers to the broad discretion given to employees as “empowerment” and it is universally touted as progressive and effective.
When compared to Western legal systems, Chinese laws are unacceptably vague and grant too much discretion to government officials. Viewed as corporate directives, however, one might conclude that Chinese laws are efficient and logical because the central leaders can set broad policy goals and the implementing government officials are empowered to find the most effective means for meeting the policy goals.
Seven features of the Chinese legal system that are analogous to corporations
The major intellectual tradition of China is Confucianism, and the International Commission of Jurists concluded that legal systems grounded in Confucian thought share certain characteristics. Their observations well describe the Chinese politico-legal system today. Again, if compared to Western legal systems, many observers would find the following characteristics undesirable. All of these features however aptly describe a corporation, and that may help people to view some of them as positive.
[The introductory paragraph includes one characteristic and six more characteristics follow in the lettered paragraphs.]
This line of reasoning [Chinese political philosophy such as that of Hsun Tsu], while it did not deny the need for some law to order society, assumed that the emphasis ought to be placed on creating a special class of virtuous rulers who should be allowed to direct society as they felt best without being hamstrung by an extensive body of rules passed down from ages past. It was very much a philosophy of the rule of men and not of law; its ideals were rendered incarnate in an intellectual elite of benevolent philosophers. The states which attempted to realize these Confucian principles were characterized by:
(A) Relatively few statutes or similar materials; such as there were, were couched in broad general language, which tended to be an injunction to comply with certain ethical principles. . . .
(B) Non-publication of administrative materials circulated internally within the government between officials.
(C) A bureaucracy, assumed to be drawn from the intellectual elite, which occupied one of the highest if not the highest prestige positions within the society.
(D) Unification of the judicial and legislative functions in the hands of the executive.
(E) A general dislike for litigation felt by the people and a corresponding lack of “rights consciousness” fostered by active policies of the government. Use of unofficial means of resolving disputes, such as mediation, was encouraged in place of recourse to courts.
(F) Non-existence of a legal profession. Those who sought to argue principles of law while representing the interests of parties were looked upon as pettifoggers and parasites and as making no useful contribution to society.
Barry Hager, The Rule of Law: A Lexicon for Policy Makers 18-19 (2002) (quoting International Commission of Jurists, The Dynamic Aspects of the Rule of Law in the Modern Age 31 (report on the Proceedings of the South-East Asian and Pacific Conference of Jurists, Bangkok, Thailand, 15-19 February 1965)).
The introductory paragraph states that “virtuous rulers [] should be allowed to direct society as they [feel] best without being hamstrung by an extreme body of rules passed down from ages past.” As shown above, officials in modern China are often free to break the rules that they create. Similarly, courts are not restricted by prior cases because case law is not binding. This is exactly like large corporations. Businesses assume that the executives of a company make decisions in the best interest of the company and that they should have wide latitude to make decisions rather than be constrained by rules made by past executives.
Paragraph (A) echoes Peter Corne’s findings, above, and fits well with the China-as-a-corporation hypothesis.
In modern China, Paragraph (B) refers to “internal documents” (neibu guiding) and they are still common–though their use is widely considered to be declining. See Randall Peerenboom, China’s Long March Toward the Rule of Law 7 (2002). The major criticism of these documents is that they have an effect on people outside the government, but the government will not let everyone see the documents. This is similar to how corporations protect their internal documents: most corporate knowledge is provided on a need-to-know basis. Businesses justify this practice as simply protecting company secrets, but the result is the same: many rules are unknown to those that are affected by the rules.
Paragraph (C) could easily describe corporate executives. Especially because most companies today try to implement a “meritocracy” where the most capable workers advance through the ranks to run the company. (“The success of business depends critically on the development of meritocracy.”)
Like the Chinese politico-legal system, corporations also unify legislative powers (rule-making power) and judicial powers in the hands of the executive–Paragraph (D). It would be bizarre to think that companies would naturally create “independent” judiciaries to enforce their rules. Collective bargaining agreements that require independent arbitrators prove the rule: it is only through negotiation that the workers are able to remove some of the judicial power from the executive.
Paragraph (E): compared with Western legal systems, people still generally avoid litigation in Chinese courts and favor alternative ways to resolve disputes. One commentator argued that China suffers from the “three nots” (san bu): people
[d]are not sue (bu gangao) because of their fear of retaliation by the government, Are unwilling to sue (bu yuangao) because of their concerns over, among other things, the cost of litigation, and Do not know how to sue (bu dongao) because of their inadequate legal knowledge and weak sense of seeking professional legal advice.
Veron Mei-Ying Hung, Judicial Reform in China: Lessons from Shanghai, 19 Colum. J. Asian L. 97, (2005) Similarly, even in companies with established grievance processes, there is typically a strong dislike of workers who rock the boat. It is common sense that whistleblowers and agitators are likely to be fired or treated poorly by their employer. Hence, most workers “go along to get along” rather than enforce their rights by complaining to others, through arbitration, or by the use of lawsuits.
Finally, Paragraph (F) is still largely true: the legal profession is growing in China, but it is still much smaller and less experienced than the West. The corporate analogs to parasitic lawyers are union organizers and activist NGOs that pressure corporations to make changes that benefit employees and citizens but damage the profits of the corporation.
The description of the Chinese legal system put forth by the International Commission of Jurists could easily be used to describe modern corporations. This suggests that Western observers may better understand the Chinese politico-legal system by analogize it with corporations rather than Western legal systems.
The organizational structure of the Chinese government is similar to a corporation
The Chinese government’s organizational structure is not precisely like a corporation, but it has some strong parallels.
As partially described above, China centralizes all legislative, executive, and judicial power into a hierarchy, and the National People’s Congress (NPC) is at the top of the hierarchy. The NPC, however, has over 3000 members and only meets for two weeks out of the year. The Standing Committee of the NPC has far fewer members and performs the majority of the functions that the NPC has the power to perform. Still, at over 170 members, the Standing Committee must delegate most power to administrative agencies.
This is similar to the corporate interaction between shareholders, the board of directors, and company executives. Technically, the shareholders have all of the power in a corporation, but they always delegate their authority to the board of directors. The board, in turn, delegates nearly all power to the executives of the company.
At many corporations, one person holds three key positions: Chair of the Board, CEO, and President. One person holding all three positions is able to exercise more control over the company than if they only occupied one office. This same phenomenon occurs in Chinese politics also. The Presidential office is relatively weak, however, the President is usually the General Secretary of the Central Committee of Communist Party of China, and the Chairperson of the Central Military Commission (the state organ that controls the military). By combining the power from the three roles, the individual has significantly more power than if she were only the President of China.
The Chinese politico-legal system is similar to corporations in: legal drafting, the legal process, distribution of power, and political organization. This suggests that Western commentators can better understand the Chinese politico-legal system by making comparisons to Western corporations rather than making comparisons to Western politico-legal systems.
