1. “Economic Law” James V. Feinerman
James M. Morita Professor of Asian Legal Studies
Georgetown University Law Center
February 2014

2. Non-tariff Barriers to Free Trade
Shortcomings of China’s multi-layered, opaque regulatory approval systems;
China’s State-owned enterprises (SOEs) drive market behavior;
failure adequately to protect intellectual property rights; and
“rule of law” issues, eg. contracting

3. Regulatory Framework History Command economy
Strong control by State Planning Commission (now the National Development and Reform Commission)
Government owned and operated enterprises (SOEs)
Top-down regulation (but local protectionism)

4. Regulatory Framework Characterized by
Administrative misunderstanding of policy issues underpinning regulations – e.g. competition laws
Embryonic rule of law creates inconsistent interpretation, e.g. “priority”
Inconsistency of implementation between authorities/levels of government (central/local)
Lack of transparency – no judicial review

5. Private Law Re-emergence of the principle of private autonomy
Codification of civil law (contracts, property and tort)
Corporate Law
General issues about company and enterprise law
The responsibility of directors and managers
Shareholders’ right to bring derivative actions
Strengthening corporate social responsibility
Corporatization of state enterprises
Protection of private enterprises
Legislation on investment funds
The securities law of , revised
Macro-economic control legislation
Competition law
Consumer protection laws

6. Labor law and the protection of labor rights
The right to work
The right to wage payment
The right to “take rest,” have holidays and leave
The right to obtain protection of occupational safety and health
The right to develop job skills and to attend job training
Labor contract and the right to bargain collectively
The right to organize trade unions (under CCP-controlled ACFTU)
The academic exploration of the possibility of legalizing the right to strike
Supervision and inspection of labor rights violations
Employee participation schemes

7. Other Commercial Law Intellectual Property Law Financial Law
Guarantee Law
Suretyship
Mortgage
Pledge
The relatively independent nature of guarantee contracts
Globalization of the Chinese economy and the country’s wish to join the WTO
Special Industry Law

8. Social Law Social security law
Legal position of the right to social security in the Chinese legal framework
History of social security reform
The level and structure of social insurance
The types of social insurance - legal reforms in China
Pension insurance
Social medical insurance
Supplementary pension system
The management and administration of social insurance funds
The right to social relief and the safety net for urban poor
The right to social welfare for the “floating” population
Poverty alleviation program in China
Direction for further reform
Environmental law and natural resources law

9. State-owned Enterprises State Assets Supervision and Administration Commission (“SASAC”)
Supervises the Government’s interest in ~120 largest enterprises
Its task – modernization with CCP and gov’t control
Creates 14 million unemployed workers p.a.

10. State-owned Enterprises (“SOEs”)
Most significant Sino-foreign transactions involve SOEs
SOEs drive market behavior
Reform process outcomes are critical to trade liberalization
Recent reduction of number of SOEs mostly the result of consolidation and merger of SOEs

11. Intellectual Property
Is China serious about enforcement of IP rights post-WTO? TRIPs agreement
China produces 350,000 technologically trained engineers every year, who in turn are generating world class technology
We may under-estimate China’s technological capacity

12. Intellectual Property
“Indigenous Innovation” – IP Piracy with Chinese Socialist Characteristics”
Recent Cases of Chinese Economic Espionage Being Prosecuted by DoJ
Protection of technological advantages is vital for foreign manufacturers
43,000 infringement claims over the past 12 months
Most processed by the State Administration for Industry and Commerce (“SAIC”) , not the Courts
Reliance on administrative functionaries
Lack of judicial review

13. Rule of Law Contracting – Impediments to Free Trade
Is my contract binding?
Western approach
Expectation of failure
Focus on written documents
“rules for the engagement of war”
Litigation
Termination of business relationship
Choice of law, forum and mode of dispute settlement

14. Rule of Law Contracting (cont’d)
Chinese approach – why relationships are important
Agreements in principle, MOUs, LOIs, HoA
Contracts – statement of intentions at the time
Commercial, financial, legal matrix
Negotiate difficulties – with someone they trust
Government role is crucial

15. Summary An FTA with China?
To negotiate an FTA without regard to these non-tariff impediments to “free” trade would be to delude ourselves that an FTA will deliver broad-ranging access to China’s markets