Twofish's Blog

June 15, 2006

Comments on the Chinese Bureaucracy

Filed under: china — twofish @ 10:39 am

I really should be going back to fixing the problems in SWIG, but I really need to make some comments on the Chinese bureaucracy in Asian Business Log.

1) The main comment that the fact that the person with the largest title may not have the highest influence or power is true in *any* complex organization. In many situations, being friends with a secretary or clerk will get more done than knowing the CEO, and figuring out who you really need to have lunch with to get something done is part of the challenge in working with any business. The only reason that this comes up as an issue in Chinese businesses and bureaucracy is that people somehow expect Chinese businesses and bureaucracies to be rigidly hierarchical, when in fact (like any large organization), the actual distribution of power is quite complex. One thing that is true in all organizations is that upper managers tend to be *very* reluctant to overrule their subordinates, since this generally provokes a huge amount of resentment, and the subordinates may be closer to the actual situation.

2) China is in the civil tradition, but because Chinese laws have been adopted piecemeal there are a lot of conflicts and contradictions involved. In this situation, case law and custom start becoming very important, because there isn't any other way of consistently resolving disputes. This gives Chinese law a common law "flavor." One thing that makes Chinese law very different from a continental law system is that there is no comprehensive civil code, and it is very unlikely that there will be one for a number of years.

IMHO, the fact that Chinese law has evolved in a piecemeal fashion is a good thing, since evolved systems tend to work much better in complex environments than designed systems.

3) The statement about the gap between theory and practice in the Central Government is incorrect. Hu Jintao outranks Wen Jiabao in both the party and state hierarchies. In 1982, when the Constitution was written, there was the idea that the President would be ceremonial, but PRC Constitutional evolution has set things up so that the President is indeed quite powerful. Also, since the mid-1990's, the prevailing practice has been to give Central Government officials, corresponding Party titles. I can't think of any case in the Central Government where a Party official outranks a government officials because in every case I can think of, the government official simultaneously wears a Party hat. The closest thing I can think of is that there appear to be "leading groups" in which the Party coordinates departments regarding a specific issue (such as Taiwan or Hong Kong), but these are more coordination groups.

4) In the case of provincial and lower areas, there is a division between Party and state, but it would be incorrect to say that the state merely rubber stamps the Party. While it is true that the Party secretary has some position in the state that is outranked by the governor, it is also true that the governor is usually some high party official. There is also a reason that there are two people in charge of a province as it divides power in a way that makes it difficult for a governor to set up a power base that is independent of the Central Government. It is usually the case that the governor is a local official, whereas the Party Secretary invariably comes from another province, and they both keep a watch for each other so that they don't start becoming too independent of Beijing.

5) The statements about Confucian and China's traditional government system are just wrong. See the excellent books on traditional Chinese law by Madeline Zelin and Philip Huang.

6) A confusing mess of regulations is not unique to China, but is present in *any* large country. See for example the very complex interaction between state and federal governments and laws in the United States. The reason the interactions are complex is because the problem is complex. It's bad if you have too much centralization. It's also bad if you have too much decentralization.

The statement that Chinese courts can't invalidate a law (you have to be very careful about your terminology here since a "law" has a specific meaning in Chinese law) is also a bit misleading. It is true that a Chinese court cannot invalidate a law, but it can find that a particular decree or regulation is not operative in a particular case and ignore it. In any case, very, very few business transactions involve appelate decisions.

But Chinese law is confusing and contradictory because all complex rule systems involving people are confusing and contradictory. That's why there are lawyers.

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2 Comments »

  1. I agree with you in preferring a legal system that evolves piecemeal, rather than by a code decreed from on high. However, one of the problems I see with the Chinese legal system in dealing with commercial disputes is that there is too much uncertainty as to how a court will rule, which can definitely make settlement difficult.

    Who are you? You definitely seem to know what you are talking about.

    Comment by China Law Blog — June 15, 2006 @ 4:25 pm

  2. I’m Joseph Wang.

    In the case of China, I agree with you about the problems with a piecemeal system. What often happens is that you end up with four different laws that were drafted separately, and are incoherent when put together. For example, in figuring what happens with a stock warrant, you have to deal with the Securities Law, the Company Law, the Contract Law, and the General Principles of Civil Law, local regulations, stock market regulations, and then you have the Legislation Law which tries to sort out which law takes precedence.

    But these I think are outweighed by the advantages. The trouble with laws in a lot of developing countries is that they are clean, clear and have no connection with reality. Once you start connecting with reality, you find that things get messy. Disagreements over the content of Chinese law are often real and deep social disagreements over what should happen, and most importantly, its usually not clear what the law should be. This leads to a lot of trial and error which leads to more confusion and incoherence, but it also leads to a system that more or less works.

    Comment by Joseph Wang — June 15, 2006 @ 9:57 pm


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