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China's rule of law in new era: The rise of regulation and formalism

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Original languageEnglish
Number of pages6
JournalJournal of Chinese Economic and Business Studies
Early online date30 Sep 2019
DOIs
Publication statusE-pub ahead of print - 30 Sep 2019

Abstract

China’s financial development and economic growth is achieved under weak legal institutions. The literature attributes this counterexample of law–finance–growth nexus to (a) alternative mechanisms in China such as incentives, reputation and relationships and (b) a well-functioning xinfang system with common law features. In recent years, China has made increasing efforts to strengthen its rule of law. The Communist Party of China (CPC) has taken the lead by launching a far-reaching campaign against corruption, establishing a system of inspection tours, and promulgating a large number of regulations. We argue that using regulations to complement laws is effective: CPC has enough bureaucratic prowess to crack down on corruption whereas the courts are subject to subversion by powerful interests. We also discuss the drawbacks of this approach: regulations aiming at ex ante control of corruption substantially increase procedural formalism and limit the discretion of local governments and state-owned enterprises.

    Research areas

  • Anti-Corruption Campaign, China, procedural formalism, regulation

ID: 113279839