Hostname: page-component-78c5997874-j824f Total loading time: 0 Render date: 2024-11-20T00:21:18.782Z Has data issue: false hasContentIssue false
  • English
  • Français

Is China an Anomaly for the “Law Matters” Hypothesis?

Published online by Cambridge University Press:  20 January 2014

Guangdong XU
Guangdong XU*
Affiliation:
Associate Professor of Law and Economics in the Research Centre for Law and Economics at the China University of Political Science and Law
Get access Rights & Permissions [Opens in a new window]

Abstract

It has long been argued that the legal system does not have a strong role in explaining China’s economic miracle; therefore, China is often presented as an anomaly for the “law matters” hypothesis. This study contributes to the debate from a unique perspective by examining the connection between law and the operation of factor markets. In China, laws and regulations governing factor markets have been systematically distorted by the government, intentionally or unintentionally, to facilitate the nation’s enormous economic growth in the short run at the cost of environmental quality, ordinary citizens’ welfare, and long-term economic health. Thus, China has become a fast-growing but unsustainable economy.

Keywords

Chinaeconomic imbalancefactor marketslaw and regulations
Type
Research Article
Information
Asian Journal of Law and Society , Volume 1 , Issue 2 , November 2014 , pp. 339 - 365
Copyright
Copyright © Cambridge University Press and KoGuan Law School, Shanghai Jiao Tong University 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

*

Guangdong Xu’s research focuses on law and economic growth, the economic analysis of property law, and corporate governance. Different versions of this paper have been presented in seminars at the University of Bologna Law School, Rotterdam Institute of Law and Economics, and International Institute for Asian Studies (Leiden). I benefited greatly from discussions with and comments by those seminar participants.

References

Allen, Franklin, Qian, Jun, & Qian, Meijun (2005) “Law, Finance, and Economic Growth in China.” 77 Journal of Financial Economics 57–116.Google Scholar
Amsden, Alice H. (1989) Asia’s Next Giant: South Korea and Late Industrialization, New York: Oxford University Press.Google Scholar
Banister, Judith, & Cook, George (2011) “China’s Employment and Compensation Costs in Manufacturing through 2008.” Monthly Labor Review 39–52.Google Scholar
Beck, Thorsten, Demirguc-Kunt, Asli, & Levine, Ross (2003) “Law and Finance: Why Does Legal Origin Matter?” 31 Journal of Comparative Economics 653–675.CrossRefGoogle Scholar
Botero, Juan C., Djankov, Simeon, La Porta, Rafael, Lopez-de-Silanes, Florencio, & Shleifer, Andrei (2004) “The Regulation of Labor.” 119 Quarterly Journal of Economics 1339–1382.CrossRefGoogle Scholar
Cai, Yongshun (2003) “Collective Ownership or Cadres’ Ownership? The Non-agricultural Use of Farmland in China.” 175 The China Quarterly 662–680.Google Scholar
Cao, Guangzhong, Feng, Changchun, & Tao, Ran (2008) “Local ‘Land Finance’ in China’s Urban Expansion: Challenges and Solutions.” 16(2) China & World Economy 19–30.CrossRefGoogle Scholar
Ceglowski, Janet, & Golub, Stephen (2011) Does China Still Have a Labor Cost Advantage? (CESifo Working Paper, No 3579), Munich: CESifo Group.Google Scholar
Chamon, Marcos D., & Prasad, Eswar S. (2010) “Why Are Saving Rates of Urban Households in China Rising?” 2(1) American Economic Journal: Macroeconomics 93–130.Google Scholar
Chen, Feng (2007) “Individual Rights and Collective Rights: Labor’s Predicament in China.” 40 Communist and Post-Communist Studies 59–79.CrossRefGoogle Scholar
China Law and Governance Review (2004) “Enforcement of Civil Judgments: Harder than Reaching the Sky,” <http://www.chinareview.info/issue2/pages/legal.htm> (last accessed 11 November 2013).+(last+accessed+11+November+2013).>Google Scholar
Clarke, Donald (1996) “Power and Politics in the Chinese Court System: The Enforcement of Civil Judgments.” 10(1) Columbia Journal of Asian Law 1–92.Google Scholar
Clarke, Donald (2005) “How Do We Know When an Enterprise Exists? Unanswerable Questions and Legal Polycentricity in China.” 19(1) Columbia Journal of Asian Law 50–71.Google Scholar
Clarke, Donald, Murrell, Peter, & Whiting, Susan (2008) “The Role of Law in China’s Economic Development,” in Loren Brandt & Thomas G. Rawski, eds., China’s Great Economic Transformation, Cambridge: Cambridge University Press, 375–428.Google Scholar
Crafts, Nicholas (1999) “Implications of Financial Crisis for East Asian Trend Growth.” 15(3) Oxford Review of Economic Policy 110–130.Google Scholar
Cross, Frank B. (2002) “Law and Economic Growth.” 80 Texas Law Review 1737–1775.Google Scholar
Ding, Chengri (2007) “Policy and Praxis of Land Acquisition in China.” 24 Land Use Policy 1–13.Google Scholar
Djankov, Simeon, La Porta, Rafael, Lopez-de-Silanes, Florencio, & Shleifer, Andrei (2002) “The Regulation of Entry.” 117 Quarterly Journal of Economics 1–37.Google Scholar
Djankov, Simeon, La Porta, Rafael, Lopez-de-Silanes, Florencio, & Shleifer, Andrei (2003) “Courts.” 118 Quarterly Journal of Economics 453–517.Google Scholar
Djankov, Simeon, McLiesh, Caralee, & Shleifer, Andrei (2007) “Private Credit in 129 Countries.” 84 Journal of Financial Economics 299–329.Google Scholar
Dollar, David (2007) Poverty, Inequality and Social Disparities during China’s Economic Reform (World Bank Policy Research Working Paper 4253), Washington, DC: World Bank.Google Scholar
Gallagher, Mary E. (2004) “‘Time is Money, Efficiency is Life’: The Transformation of Labor Relations in China.” 39(2) Studies in Comparative International Development 11–44.Google Scholar
Geng, Nan, & N’Diaye, Papa (2012) Determinants of Corporate Investment in China: Evidence from Cross-Country Firm Level Data (IMF Working Paper, WP/12/80). Washington, DC: International Monetary Fund.Google Scholar
Ginsburg, Tom (2000) “Does Law Matter for Economic Development? Evidence from East Asia.” 34 Law and Society Review 829–856.Google Scholar
Haggard, Stephan (1999) “Governance and Growth: Lessons from the Asian Economic Crisis.” 13 Asian Pacific Economic Literature 30–42.CrossRefGoogle Scholar
Harney, Alexandra (2009) The China Price: The True Cost of Chinese Competitive Advantage, New York: Penguin Press.Google Scholar
Hayami, Yujiro, & Godo, Yoshihisa (2005) Development Economics: From the Poverty to the Wealth of Nations, New York: Oxford University Press.Google Scholar
He, Jianwu, & Kuijs, Louis (2007) Rebalancing China’s Economy-Modeling a Policy Package (World Bank China Research Paper, No. 7). Beijing: World Bank Beijing Office.Google Scholar
He, Xin (2009) “Enforcing Commercial Judgments in the Pearl River Delta of China.” 57 American Journal of Comparative Law 419–456.CrossRefGoogle Scholar
Ho, Peter (2005) Institutions in Transition: Land Ownership, Property Rights, and Social Conflict in China, New York: Oxford University Press.Google Scholar
Ho, Virginia E. Harper (2009) “From Contracts to Compliance? An Early Look at Implementation under China’s New Labor Legislation.” 23 Columbia Journal of Asian Law 35–107.Google Scholar
Huang, Philip C.C. (2011) “The Theoretical and Practical Implications of China’s Development Experience: The Role of Informal Economic Practices.” 37(1) Modern China 3–43.Google Scholar
Huang, Yasheng (2010) “Urbanization, Hukou System and Government Land Ownership: Effects on Rural Migrant Workers and on Rural and Urban Hukou Residents” (Background Paper for the Global Development Outlook 2010), <http://www.oecd.org/dataoecd/30/13/44772487.pdf> (last accessed 4 July 2012).+(last+accessed+4+July+2012).>Google Scholar
Huang, Yiping (2010) “China’s Great Ascendancy and Structural Risks: Consequences of Asymmetric Market Liberalization.” 24(1) Asian-Pacific Economic Literature 65–85.Google Scholar
Huang, Yiping, & Tao, Kunyu (2010) “Factor Market Distortion and the Current Account Surplus in China.” 9(3) Asian Economic Papers 1–36.Google Scholar
Hung, Veron Mei-Ying (2004) “China’s WTO Commitment on Independent Judicial Review: Impact on Legal and Political Reform.” 52 American Journal of Comparative Law 77–132.Google Scholar
Kim, Jong-Il, & Lau, Lawrence J. (1994) “The Sources of Economic Growth of the East Asian Newly Industrialized Countries.” 8 Journal of the Japanese and International Economies 235–271.Google Scholar
Kim, Jong-Il, & Lau, Lawrence J. (1995) “The Role of Human Capital in the Economic Growth of the East Asian Newly Industrialized Countries.” 1(3) Asia-Pacific Economic Review 3–22.Google Scholar
Kim, Jong-Il, & Lau, Lawrence J. (1996) “The Sources of Asian Pacific Economic Growth.” 29 Canadian Journal of Economics S448–S454.Google Scholar
Knack, Stephen, & Keefer, Philip (1995) “Institutions and Economic Performance: Cross-Country Tests Using Alternative Institutional Measures.” 7 Economics and Politics 207–227.CrossRefGoogle Scholar
Knight, John, & Song, Lina (1999) “Employment Constraints and Sub-Optimality in Chinese Enterprises.” 51 Oxford Economic Papers 284–299.Google Scholar
Kuijs, Louis, & Wang, Tao (2006) “China’s Pattern of Growth: Moving to Sustainability and Reducing Inequality.” 14(1) China and World Economy 1–14.Google Scholar
La Porta, Rafael, Lopez-de-Silanes, Florencio, Pop-Eleches, Cristian, & Shleifer, Andrei (2004) “Judicial Checks and Balances.” 112 Journal of Political Economy 445–470.Google Scholar
La Porta, Rafael, Lopez-de-Silanes, Florencio, & Shleifer, Andrei (2002) “Government Ownership of Banks.” 57 Journal of Finance 265–301.CrossRefGoogle Scholar
La Porta, Rafael, Lopez-de-Silanes, Florencio, & Shleifer, Andrei (2006) “What Works in Securities Law.” 61 Journal of Finance 1–31.Google Scholar
La Porta, Rafael, Lopez-de-Silanes, Florencio, & Shleifer, Andrei (2008) “The Economic Consequences of Legal Origins.” 46 Journal of Economic Literature 285–322.CrossRefGoogle Scholar
La Porta, Rafael, Lopez-de-Silanes, Florencio, Shleifer, Andrei, & Vishny, Robert (1997) “Legal Determinants of External Finance.” 52 Journal of Finance 1131–1150.Google Scholar
Lardy, Nicholas R. (2007) “China Rebalancing Economic Growth,” in C. Fred Bergsten, Bates Gill, Nicholas R. Lardy, & Derek J. Mitchell, eds., The China Balance Sheet in 2007 and Beyond, Washington, DC:The Center for Strategic and International Studies and the Peterson Institute for International Economics, 1–24.Google Scholar
Lardy, Nicholas R. (2012) Sustaining China’s Economic Growth After the Global Financial Crisis, Washington, DC: Peterson Institute for International Economics.Google Scholar
Laurens, Bernard J., & Maino, Rodolfo (2007) China: Strengthening Monetary Policy Implementation (IMF Working Paper, WP/07/14), Washington, DC: International Monetary Fund.Google Scholar
Lee, Chang-Hee (2006) “Law and Development: Korean Contemporary History in Retrospect,” <www.law.wisc.edu/gls/documents/changheelee_paper.doc> (last accessed 18 October 2013).+(last+accessed+18+October+2013).>Google Scholar
Li, Hongbin, & Zhou, Li-An (2005) “Political Turnover and Economic Performance: The Incentive Role of Personnel Control in China.” 89 Journal of Public Economics 1743–1762.CrossRefGoogle Scholar
Liebman, Benjamin L. (2007) “China’s Courts: Restricted Reform.” 21(1) Columbia Journal of Asian Law 1–44.Google Scholar
Liu, M.-H., Margaritis, D., & Tourani-Rad, A. (2009) “Monetary Policy and Interest Rate Rigidity in China.” 19 Applied Financial Economics 647–657.Google Scholar
Lubman, Stanley (1999) Bird in a Cage: Legal Reform in China after Mao, Stanford, CA: Stanford University Press.Google Scholar
Lubman, Stanley (2000) “Bird in a Cage: Chinese Law Reform After Twenty Years.” 20 Northwestern Journal of International Law and Business 383–423.Google Scholar
Lubman, Stanley (2006) “Looking for Law in China.” 20(1) Columbia Journal of Asian Law 1–92.Google Scholar
Ma, Guonan, & Wang Yi (2010) China’s High Saving Rate: Myth and Reality (Bank for International Settlements Working Paper, No. 312). Basel: Bank for International Settlements.Google Scholar
McGregor, Richard (2010) The Party: The Secret World of China’s Communist Rulers, New York: HarperCollins Publishers.Google Scholar
Meng, Xin, & Zhang, Junsen (2001) “The Two-Tier Labor Market in Urban China: Occupational Segregation and Wage Differentials between Urban Residents and Rural Migrants in Shanghai.” 29 Journal of Comparative Economics 485–504.Google Scholar
Milhaupt, Curtis J., & Pistor, Katharina (2008) Law and Capitalism: What Corporate Crises Reveal about Legal Systems and Economic Development around the World, Chicago: University of Chicago Press.Google Scholar
Naughton, Barry (2007) The Chinese Economy: Transitions and Growth, Cambridge, MA: MIT Press.Google Scholar
Naughton, Barry (2008) “A Political Economy of China’s Economic Transition,” in Loren Brandt & Thomas G. Rawski, eds., China’s Great Economic Transformation, Cambridge: Cambridge University Press, 91–135.CrossRefGoogle Scholar
North, Douglass C. (1981) Structure and Change in Economic History, New York: W.W. Norton & Company.Google Scholar
North, Douglass C., & Thomas, Robert Paul (1973) The Rise of the Western World: A New Economic History, New York: Cambridge University Press.Google Scholar
OECD (2006) Challenges for China’s Public Spending: Toward Greater Effectiveness and Equity, Paris: OECD Publishing.Google Scholar
Ohnesorge, John K.M. (2012) “Law and Development Orthodoxies and the Northeast Asian Experience,” in Gerald Paul McAlinn & Caslav Pejovic, eds., Law and Development in Asia, New York: Routledge, 9–42.Google Scholar
Oksenberg, Michael (2001) “China’s Political System: Challenges of the Twenty-First Century.” 45 China Journal 21–35.Google Scholar
Peerenboom, Randall (2002) China’s Long March toward Rule of Law, Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Pei, Minxin (2001) “Does Legal Reform Protect Economic Transactions? Commercial Disputes in China,” in Peter Murrell, ed., Assessing the Value of Law in Transition Economies, Ann Arbor: University of Michigan Press, 180–210.Google Scholar
Pei, Minxin (2006) China’s Trapped Transition: The Limits of Developmental Autocracy, Cambridge, MA: Harvard University Press.Google Scholar
Pejovich, Svetozar (1990) The Economics of Property Rights: Towards a Theory of Comparative Systems, Dordrecht: Kluwer Academic Publishers.Google Scholar
Pils, Eva (2005) “Land Disputes, Rights Assertion, and Social Unrest in China: A Case from Sichuan.” 19 Columbia Journal of Asian Law 235–292.Google Scholar
Pistor, Katharina, & Wellons, Philip A. (1999) The Role of Law and Legal Institutions in Asian Economic Development: 1960–1995, New York: Oxford University Press.Google Scholar
Pivot Capital Management (2009) “China’s Investment Boom: The Great Leap into the Unknown,” <http://www.pivotcapital.com> (last accessed 16 September 2009).+(last+accessed+16+September+2009).>Google Scholar
Prasad, Eswar S., & Rajan, Raghuram G. (2006) “Modernizing China’s Growth Paradigm.” 96(2) American Economic Review 331–336.Google Scholar
Prosterman, Roy, Zhu, Keliang, Ye, Jianping, Riedinger, Jeffrey, Li, Ping, & Yadav, Vandana (2009) Secure Land Rights as a Foundation for Broad-Based Rural Development in China: Results and Recommendations from a Seventeen-Province Survey (National Bureau of Asian Research Special Report, No. 18), Seattle: National Bureau of Asian Research.Google Scholar
Qi, Li, & Prime, Penelope B. (2009) “Market Reforms and Consumption Puzzles in China.” 20 China Economic Review 388–401.Google Scholar
Rosenberg, Nathan, & Birdzell, L.E. Jr. (1986) How the West Grew Rich: The Economic Transformation of the Industrial World, New York: Basic Books.Google Scholar
Solow, Robert M. (1956) “A Contribution to the Theory of Economic Growth.” 70 Quarterly Journal of Economics 65–94.Google Scholar
Tao, Ran, Su, Fubing, Liu, Mingxing, & Cao, Guangzhong (2010) “Land Leasing and Local Public Finance in China’s Regional Development: Evidence from Prefecture-level Cities.” 47(10) Urban Studies 2217–2236.Google Scholar
Trebilcock, Michael, & Leng, Jing (2006) “The Role of Formal Contract Law and Enforcement in Economic Development.” 92 Virginia Law Review 1517–1580.Google Scholar
Upham, Frank K. (2005) “Political Lackeys or Faithful Public Servants? Two Views of the Japanese Judiciary.” 30 Law and Social Inquiry 421–455.Google Scholar
Wade, Robert (1990) Governing the Market: Economic Theory and the Role of Government in East Asian Industrialization, Princeton, NJ: Princeton University Press.Google Scholar
Wang, Hsiao-Ming, & Alarid, Leanne Fiftal (2001) “Judicial Sentencing Decisions in Taiwanese Economic Crimes: Consequences of Swift Justice.” 35 Law and Society Review 607–632.CrossRefGoogle Scholar
Wilhelm, Katherine (2004) “Rethinking Property Rights in Urban China.” 9 UCLA Journal of International Law and Foreign Affairs 227–299.Google Scholar
Winn, Jane Kaufman (1994) “Relational Practices and the Marginalization of Law: Informal Financial Practices of Small Businesses in Taiwan.” 28 Law and Society Review 193–232.Google Scholar
World Bank (1993) The East Asian Miracle: Economic Growth and Public Policy, New York: Oxford University Press.Google Scholar
World Bank (2002) Building Institutions for Markets (World Development Report 2002), New York: Oxford University Press.Google Scholar
World Bank (2007) Cost of Pollution in China: Economic Estimates of Physical Damages, Washington, DC: World Bank.Google Scholar
World Bank (2009) China—From Poor Areas to Poor People: China’s Evolving Poverty Reduction Agenda—An Assessment of Poverty and Inequality in China, Washington, DC: World Bank.Google Scholar
World Bank (2012a) “China—Land Transfer and Registration Technical Assistance: Report on Survey of Rural Households and Other Stakeholders in Anhui and Shandong Provinces,” <http://documents.shihang.org/curated/zh/2012/01/16418165/china-land-transfer-registration-technical-assistance-report-survey-rural-households-other-stakeholders-anhui-shandong-provinces> (last accessed 10 June 2012).+(last+accessed+10+June+2012).>Google Scholar
World Bank (2012b) “Doing Business 2012: Doing Business in a More Transparent World,” <http://www.doingbusiness.org/~/media/FPDKM/Doing%20Business/Documents/Annual-Reports/English/DB12-FullReport.pdf> (last accessed 19 October 2013).+(last+accessed+19+October+2013).>Google Scholar
Xu, Guangdong (2011) “The Role of Law in Economic Growth: A Literature Review.” 25(5) Journal of Economic Surveys 833–871.Google Scholar
Yang, Dennis Tao, Chen, Vivian Weijia, & Monarch, Ryan (2010) “Rising Wages: Has China Lost Its Global Labor Advantage?” 15(4) Pacific Economic Review 482–504.Google Scholar
Young, Alwyn (1994) “Lessons from the East Asian NICs: A Contrarian View.” 38 European Economic Review 964–973.Google Scholar
Young, Alwyn (1995) “The Tyranny of Numbers: Confronting the Statistical Realities of the East Asian Growth Experience.” 110 Quarterly Journal of Economics 641–680.Google Scholar
Yu, Guanghua, & Zhang, Hao (2008) “Adaptive Efficiency and Financial Development in China: The Role of Contracts and Contractual Enforcement.” 11 Journal of International Economic Law 459–494.Google Scholar
Yusuf, Shahid, & Nabeshima, Kaoru (2006) China’s Development Priorities, Washington, DC: World Bank.Google Scholar
Zheng, Yin Lily (2009) “It’s Not What Is on Paper, but What Is in Practice: China’s New Labor Contract Law and the Enforcement Problem.” 8 Washington University Global Studies Law Review 595–617.Google Scholar
Zhu, Keliang, & Prosterman, Roy (2007) Securing Land Rights for Chinese Farmers: A Leap Forward for Stability and Growth (Center for Global Liberty & Prosperity Development Policy Analysis No. 3.), Washington, DC: Center for Global Liberty & Prosperity.Google Scholar
Zhu, Keliang, Prosterman, Roy, Ye, Jianping, Li, Ping, Riedinger, Jeffrey, & Ouyang, Yiwen (2006) “The Rural Land Question in China: Analysis and Recommendations Based on a Seventeen-Province Survey.” 38 New York University Journal of International Law and Politics 761–839.Google Scholar