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Laws should reflect market economy
2003-10-27
China Daily
Improving China's market economy related legal framework is a must for the maturity of the country's nascent mar-ket economy, according to a signed article in Beijing-based magazine China Newsweek.
Although a basic framework of market economy has been established in China thanks to relentless efforts over the past two decades, residues of the planned economy still linger and remain unsolved. The market economy framework is yet to be improved.
The third plenum of the 16th Central Committee of the Communist Party of China, which concluded early this month, thus made it an urgent task to accomplish a unified, open and orderly market system. Improvement of the economy-related law framework was stressed.
There is an imbalance between the development of China's market-driven economy and its civil and commercial legislation, according to Li Shuguang, author of the article.
Some key laws governing economic operation are still lacking, including laws regulating market entry, transaction and exit. Of those already in existence, many contradict each other or are poorly applicable, said Li, a professor from the China University of Politics and Law.
For example, the Company Law, adopted in late 1993, mainly targets State-owned enterprises. It can no longer cater to the needs of the times since it has some discriminative provisions, although in secretive forms, for non-State enterprises.
The Company Law should be revised to be more corporation-oriented, instead of State-oriented. It should lower the threshold for the market entry of private enterprises and lessen government regulations.
Laws concerning market transactions in China are the Contract Law, the Guarantee Law and the Securities Law. An anti-fraud transaction law should be drafted to complete the framework.
The revision of the Securities Law has been a focus of attention. Drafted in 1998, when Asia was haunted by financial crisis, the law concentrated more on regulation than warding off risks. However, many provisions are restrictive and forbidding principles with poor applicability.
The current divided financial operational mode should be adjusted in revising the securities law, Li said.
A mixed operational mode should be started to cater to the new circumstances and create room for further reforms of China's financial sector.
The article said that more detailed rules for securities transactions should be drafted. As well, bank capital should be allowed in the stock market and restrictions on financing and transactions by stock brokers should be eased on the basis of solid risk control.
The civil indemnity system should be stipulated in the law to protect the interests of investors from being abused. With such stipulations, the false statement, under-the-counter deals, market manipulation and malicious fraud currently plaguing the market could be stemmed. The court should also be allowed to get directly involved in cases of civil indemnity incurred in stock transactions.
Regarding market exit, the drafting of the Bankruptcy Law should be promptly completed. Hopefully it will come out soon since the Standing Committee of the National People's Congress has included it in this year's legislation plan, the article said.
Li suggested an independent national court system for bankruptcy cases be established. Those independent courts, under the direct administration of the Highest People's Court, would be free from intervention by local interests and would deal with cross-regional cases to protect the interests of creditors that may scatter across the country.
The article also calls for the drafting of an anti-monopoly law to regulate market order. It will be a basic law of the market economy environment.
China's transition from a planned economy to a market-driven one demands such a law to ensure fair competition in a monopoly-ridden market. Currently, monopoly is common in such industries as railway, telecommunications, banking and financial sector.
Meanwhile, a global merger wave has spilled over to this country. China needs such a law to push fair competition and protect the interests of consumers.
The article also proposed to change the name of current State Assets Law into the State Assets Management Law or Operational State Assets Management Law.
China has inherited a huge number of State assets, especially operational assets such as State enterprises, from the past planned economy. Because of blurred property rights and poor management, State assets losses have been a serious problem.
The loss of State assets is a rather complicated issue, and it is often difficult to untangle the relations between the involved parties.
In this condition, an overall State assets law that encompasses all aspects of the issue would be impossible, the article said. A more advisable choice is to streamline coverage of the law, making it more applicable and effective.
The new State assets management law should define the role of the newly-established State-owned Assets Supervision and Administration Commission. The rights, duties and accountability of the department should be clearly established.
The law should also define the proper relationship between the central State assets management body and its local counterparts.
Moreover, the transaction rules, pricing mechanism and transaction procedures of State assets should be clarified.
The applicability of the law should be especially stressed, the article said.
Proper supervisors should be empowered to counter State assets managers. When State assets losses or property rights disputes arise, the law should ensure they can be submitted to the court for resolution.
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