Policy, law and private economic rights in China: the doctrine and practice of law on economic contracts

Abstract

The Economic Contract Law of the People's Republic of China expresses the regime's willingness to extend to economic actors limited private economic rights under the new economic reform policies. The emergence of private economic rights has significance both for its potential effect on economic growth and for its long term impact on the political authority of the state in post-Mao China. In order for the law to stimulate the emergence of private economic rights, however, it must be accepted by economic actors as a basis for economic transactions. Thus, it must achieve legitimacy.The legitimacy sought must include both abstract and practical legitimacy such that the rules set forth by the doctrine of the law are accepted as valid conceptually and relied upon operationally by economic actors. Tentative conclusions as to the potential for the Economic Contract Law and its related regulations to achieve legitimacy in China may be reached by examining the doctrine and practice of the law in the context of the pre-existing norms with which the law competes for acceptance.Doctrinal pronouncements by political leadership groups and legal communities in China reveal consensus and divergence on the issues of the function of contracts and contract law, the nature of contract supervision, and the character of dispute settlement and sanctions for non-performance. The interplay between such consensus and divergence suggests that the doctrine of the law will attain abstract legitimacy.However, the application of the law in specific disputes has revealed obstacles to the acquisition of practical legitimacy. Political and economic factors have rendered contract performance problematic while continued reluctance to impose monetary penalties for non-performance has impeded the reliability of contracts. Nonetheless, popular dissemination of contract rules recognizing the rights of contracting parties together with the establishment of institutions to enforce such rights represent a foundation on which the practical legitimacy of the law may be built.Thus, while obstacles remain, an important foundation has been established for the full legitimation of the Economic Contract Law and for the further emergence of private economic rights in China.