1. Introduction 1
1.1 Structure of the book 3
1.2 Case studies 4
1.3 Business in China 7
2. Legal and Economic Reforms and the Development of a Corporate Sector 9
2.1 Introduction 9
2.2 Overview of corporate sector development 14
2.2.1 State-owned and collectively-owned enterprises 14
2.2.2 Private firms 16
2.2.3 Foreign firms 18
2.2.4 The court system 21
2.3 Rural and urban reforms in the 1980s 22
2.4 'Open door' policy (1978/1992- ) 26
2.5 Early 1990s' liberalization policies 32
2.6 Mid to late 1990s' focused marketization 36
2.6.1 Innovative capacity 37
2.6.2 Privatizing state-owned enterprises and improving the corporate legal foundation 39
2.7 Rapid market development in the 2000s 45
2.7.1 The banking system 47
2.7.2 Capital markets 51
2.8 Conclusion 55
Appendix 2.1 Key Chinese commercial and civil laws 56
Appendix 2.2 Securities and banking regulations in China 57
3. Law and Markets 59
3.1 Introduction 59
3.2 Law and markets 61
3.2.1 Theoretical and empirical relationships between laws and markets 61
3.2.2 The China paradox 63
3.2.3 A complementary view of legal and economic development 68
3.2.4 Structure of the chapter 68
3.3 A comparative perspective of legal development and markets 69
3.3.1 Chinese law 69
3.3.2 Laws and markets in China and the USA 71
3.3.2.1 Patent laws and economic growth 74
3.3.2.2 Corporate law and economic necessity 76
3.3.2.3 Regulatory reform supporting markets: China's CSRC(China Securities Regulatory Commision) and the US SEC 78
3.4 Complementarities between law and markets 81
3.4.1 A test of Granger non-causality 82
3.4.2 The empirical results 84
3.5 Institutions and transition in China 87
3.6 Enforcement of laws 90
3.6.1 Foreign firms 90
3.6.2 Informal institutions 91
3.7 Conclusion: China's legal and economic reforms in an era of global integration 93
4. State-Owned Enterprises: Law as Instrument of Economic Policy 97
4.1 Introduction 97
4.2 Early reforms: Incentivizing state-owned enterprises in the 1980s 101
4.2.1 SOELaw 101
4.2.2 Bankruptcy Law 103
4.2.3 Contract Responsibility System (CRS) 104
4.2.4 Problems with the CRS 106
4.3 Gongsihua and ownership reform in the 1990s 109
4.3.1 Corporatization 109
4.3.2 'Grasping the large, releasing the small' 111
4.4 Dispersed ownership and the enactment of securities laws 114
4.5 Governance by corporate laws in the 2000s 118
4.6 Conclusion 120
Case study 1: Three decades of state-owned enterprise reform—Haier 121
Case study 2: State ownership and consolidation—national oil companies (by Kun-Chin Lin, King's College, London) 130
Case study 3: High-tech goods/R&D sector—the aviation industry 136
Case study 4: Corporatization of state-owned banks: ICBC 144
5. Collectively-Owned Enterprises: Hybrid Ownership Form and the Partial Reform Strategy 158
5.1 Introduction 158
5.2 Origins of township and village enterprises (TVEs) 161
5.3 The rise and fall of TVEs 165
5.4 The multi-tasking role of TVEs 168
5.4.1 Why publicly-owned enterprises multi-task 169
5.4.2 Theoretical basis of TVEs 171
5.4.3 Shifting policy base 173
5.4.4 TVEs in transition 175
5.5 Urban collectives and the performance of the collective sector 177
5.6 Conclusion 182
Case study 5: Evolution of TVEs—the toy industry 184
6. Private Firms: Law Ex Post and as Obstacle 187
6.1 Introduction 187
6.2 The laws and policies governing an evolving private sector 189
6.3 Constrained entrepreneurship 191
6.3.1 Social networks 191
6.3.2 Institutional impediments 193
6.4 Entrepreneurial determinants 194
6.5 The traits of entrepreneurs 195
6.5.1 Socio-economic factors influencing urban residents 203
6.5.2 Socio-economic factors influencing migrant entrepreneurs 207
6.5.3 Legal development influencing both sets of entrepreneurs 210
6.5.4 Robustness of legal development and the entrepreneurship decision 212
6.5.5 Provincial rates of self-employment 215
6.6 Conclusion 218
Case study 6: Going global—Lenovo and the PC industry 219
7. Foreign Firms: Law Leading the Market 225
7.1 Introduction 225
7.1.1 Law leading the market 227
7.1.2 Structure of the chapter 228
7.2 Foreign direct investment and Special Economic Zones 229
7.2.1 FDlinChina 229
7.2.2 Special Economic Zones 232
7.3 FDI policies and laws 235
7.4 Laws leading market development 238
7.5 Post-WTO accession and international economic laws 243
7.5.1 FDI laws and policies continuing to circumscribe the market 243
7.5.2 The influence of international economic law 245
7.6 Conclusion 248
Case study 7: Specializing in low-tech exports: textiles and clothing 249
Case study 8: Developing a medium-tech sector: automobile industry 259
Case study 9: Early FDI policy—joint ventures and the mobile phone industry 270
Case study 10: Wholly foreign-owned enterprises—Carrefour and the retail sector (by Jonathan Story, INSEAD) 279
Appendix 7.1 Special Economic Zones (SEZs) 283
8. Conclusions: Business in China—The Evolution of Laws and the Market 285
8.1 Introduction 285
8.2 Do corporate laws matter in China? 288
8.3 Ongoing corporate sector reforms 297
8.3.1 Transformation of state-owned enterprises 297
8.3.2 'Going out' policy 300
8.3.3 Private firms 301
8.4 The Chinese business environment in the twenty-first century 303
8.4.1 The second thirty years of reform 303
8.4.2 The evolving market 306
8.5 Assessing the future contour of China's market 309
Case study 11 : Post-WTO financial market development(by Sanzhu Zhu, SOAS, University of London) 311
Case study 12: Effectiveness of laws—evaluating the patent laws 322
Appendix 8.1 Company registration in China 328
Bibliography 335
Index 353