Rule of Law and Rule of Officials: Shareholder Litigation and Anti-Dumping Practice in China
Rule of Law in China Series Policy Brief No. 4
12 Pages Posted: 29 Apr 2008
Date Written: Februay 2008
Abstract
China has achieved remarkable success in building the necessary institutions for a functional legal system. However, it seems that the Chinese government is more willing to nurture rule of law in some areas, while still striving to maintain excessive administrative discretion - namely rule of government officials - in other areas. Shareholders' litigation and anti-dumping investigation are two such contrasting examples. This brief will examine the evolution of shareholders' suits in China as well as the government's anti-dumping practice, analyze the different roles played by law and government officials therein and the reasons for such differences, and offer policy recommendations. By comparing the rule of law development in these two areas, this brief revisits the conventional law matters thesis in corporate governance and capital markets regulation, and its wider implications on law and development. Capital markets development follows the grow-then-law approach, namely legal changes have tended to follow, rather then precede, economic changes in China. Strengthened legal protection was a result of lobbying efforts of a growing domestic constituency comprising of both individual and institutional shareholders in China. The government's concern for social stability also explains why the political environment is becoming increasingly friendly to minority shareholders. Furthermore, industrial policy explains plausibly why the excessive use of administrative discretion is still a practice in anti-dumping investigations. The government would use anti-dumping to compensate industries whose interests are harmed as a result of China's WTO accession. The brief opines that, although China will continue its journey to rule of law, legal construction in China will be mainly driven by domestic political forces rather than external influences. The brief offers policy recommendations for further improvement.
Keywords: Chinese law, shareholder litigation, anti-dumping, law and development
JEL Classification: K22, K41, Q1
Suggested Citation: Suggested Citation