China has been undertaking economic reform for two decades and is now struggling to establish a system of market economy within the still existing, but crumbling, institutions and ideologies of the former planned economy. At the same time Chinese leaders also acknowledge that law is an important instrument in transforming the economy. Thus China has been undertaking a substantial legal reform.
Law has been politicized since 1949 and the Great Cultural Revolution further turned China into a juridical vacuum that lasted for a decade. The construction of a new legal system is a difficult task since the experience and knowledge of legal practitioners and scholars were wholly wiped out.
After much effort, law in China has begun to evolve, unevenly and slowly, into a distinct body of rules and institutions. Of all the legal institutions that have appeared since the reforms, those concerned with foreign investment have developed the fastest. Laws designed specifically for foreign investors are more market-oriented, aiming at promoting market-oriented economic behavior. They are enacted to deal with concerns with which the domestic legal system cannot cope. This new set of rules which has been implemented in a laboratory-type environment has also influenced the development of laws for domestic enterprises to a certain extent. In this process of legal development, there has been a rapid, though gradual, introduction of Western ideas of laws.
While only twenty years ago laws and regulations were virtually non-existent, now Chinese citizens even enjoy the right to challenge the decisions of government officials in court. Since 1979, China has enacted more than 300 laws, more than 700 regulations and a large volume of local regulations. Along with law-making came the rebuilding of a legal infrastructure to make the new laws work. Judicial agencies were re-established and the legal profession has been restored. As Professor Alford has commented, no other major modern society has endeavored in so short a time to reconstruct its legal system in so extensive and novel a fashion. 1 Indeed, the accomplishments of legal reform are considerable when measured against the pre-reform state of Chinese law. 2
Despite the achievements in law reforms, however, foreign investors still encounter many problems such as legal uncertainty and difficulty enforcing legal rights in China. To improve the situation, China has several times adopted new