Chinese Consumer Law: Recent Developments and Implications

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ABSTRACT

A consequence of shifting from a centralised to a decentralised market in China is the growing demand for legislation to regulate relationships between different market players. A system of consumer law is necessary to govern the dealings between business operators and consumers. In response to this need, a national consumer statute as well as statutes in other areas have been enacted to deal with various aspects of consumer protection. This paper discusses the roles of the relevant pieces of legislation in protecting consumers in China. This paper also discusses the recent developments in the Chinese consumer law under the revised criminal legislation and the consolidated contract statute, and their implications for investors.

JEL: K39

Keywords: Business; China; Competition; Consumer protection; Contract law, Criminal law; Product quality

I. INTRODUCTION

There is a saying among foreign business operators that, even selling sewing needles, you can still make a fortune in China, if everyone buys one needle from you. This statement suggests the magnitude of the Chinese consumer market. China has nearly a quarter of the world's population. With its 1.25 billion people, all potential consumers, China has become a substantial world market. In addition to the huge population, China's market-oriented economic reform, its on-going open door policy for foreign investment, and its forthcoming entry to the World Trade Organisation is bringing about a blossoming of the commodity market.

However, even under these favourable trading conditions, not all investments in China warrant a rich return. Instead some have suffered from crushing failure. One explanation for this is that foreign investors are unfamiliar with the legal environment in China, and are not aware of the growth of the Chinese consumer movement. Consumer protection is a relatively new area of law in China. In spite of its profound impact on traders in the Chinese market place, the study of Chinese consumer law is not popular amongst western scholars. Very little has been written in a foreign language about the legislation protecting consumers, even though it is part of the overall Chinese legal reform. (1)

The primary aims of this paper are to increase foreign investors' awareness of legal protection of consumers in China, and to generate discussion in this area of law amongst foreign scholars. With these goals in mind, the paper is divided into four parts. In part one, the paper briefly discusses the major Chinese legislation relevant to consumer protection, such as the General Principles of Civil Law, the Product Quality Law, the Unfair Competition Law, the Advertising Law, and the Consumer Protection Law. In part two, the paper focuses on examining aspects of consumerism in recent enactments, namely, The Criminal Law of the People's Republic of China, and The Contract Law of the People's Republic of China. In part three, the paper discusses the implications of the Chinese consumer law and its latest developments for business operators. The final part submits that these legislations all have a distinct role in the consumer protection movement. They supplement rather than replace each other.

II. THE LEGAL FRAMEWORK OF CHINESE CONSUMER PROTECTION--AN OVERVIEW

The theory of consumer protection does not have a long history in contemporary China. This is partly because the establishment of the People's Republic of China in 1949 brought about a major change to the structure of the Chinese economy. From 1949 to 1978, the Chinese government adopted a model of planned economy, where the State controlled production and distribution of all commodities. (2) Since the government purchased all production from manufacturers, the latter were not concerned with profit-making. Furthermore, there was no incentive for business operators to behave unethically or dishonestly to obtain greater profits. …