Chapter 3.1: Setting up Business in the People s Republic of China


Gary Lock and Brinton M. Scott, Herbert Smith, China

Introduction, commercial and legal framework

The People's Republic of China (PRC) has undergone major economic reforms since adopting its open door policy in 1978. Since 1978 China has encouraged foreign direct investment (FDI) to stimulate the economy, modernize the country, build infrastructure and obtain advanced technology. As a part of this China has made numerous economic changes, including decentralization of economic control from state management in certain sectors, creation of special economic zones and relaxation of state controlled production.

Development of the legal system

The Chinese government recognized early that a developed legal system would be necessary to support the planned economic reform. As a result the National People's Congress (NPC) revived and institutionalized the PRC legal system in 1982 by radically amending the PRC Constitution, and since then by rapidly developing a body of commercial law, including the 1993 Company Law , which unifies scores of regulations dealing with corporate governance.

Many of China's current laws are based on civil law systems, which are derived from general codes rather than judicial precedent as found in common law systems. Nevertheless, the Chinese also emulate the concepts and models of other legal systems.

World Trade Organization

China acceded into the World Trade Organization (WTO) on 11 December 2001. As a WTO member China must further revise its legal system to meet the WTO's three main principles of non-discrimination , uniform treatment for all, and a transparent legal system. China faces a six-year schedule, beginning in 2002, to formally integrate into the global trading system. As a lead up to its entry into the WTO, the PRC repealed and amended dozens of investment- related laws and regulations. The difficulties facing WTO compliance, however, are compounded where provincial and local interests are involved. Thus the process of modifying the PRC's commercial legal framework is certain to be lengthy.




Doing Business with China
Doing Business with China
ISBN: 1905050089
EAN: 2147483647
Year: 2003
Pages: 648
Authors: Lord Brittan

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