Contract Law in the People's Republic of China - Rule or Tool: Can the PRC's Foreign Economic Contract Law Be Administered According to the Rule of Law?

By Lewis, Mark C. | Vanderbilt Journal of Transnational Law, May 1997 | Go to article overview

Contract Law in the People's Republic of China - Rule or Tool: Can the PRC's Foreign Economic Contract Law Be Administered According to the Rule of Law?


Lewis, Mark C., Vanderbilt Journal of Transnational Law


I. INTRODUCTION

"Arbitrary Justice: Breach of contract in China becomes test case;"(1)

"S&P Warns China That Confidence May Be Hurt by Contract

Disputes."(2)

Despite the size and growth potential of the People's Republic of

China (PRC), some international investors are questioning the

wisdom of doing business with Chinese companies.(3)

Highly publicized contractual disputes between Chinese and foreign enterprises have focused attention on the PRC's perceived failure to consistently enforce contractual obligations according to the rule of law.(4) China has drawn the attention of the international community for two reasons. First, despite perceived problems with contractual enforcement, the PRC represents a large and attractive market for foreign enterprises. China's economy is the most dynamic of any size in the world.(5) With a population of 1.1 billion,(6) an average annual gross domestic product growth rate of seven percent over the last fourteen years,(7) an abundance of low-cost labor, natural resources and space, and its proximity to other booming markets in East and Southeast Asia,(8) the PRC is an attractive target for firms seeking to open new markets. For example, from 1979 to 1982, the amount of money committed for investment in China by U.S. companies totaled $2.81 million.(9) By 1995, U.S. investment in China had increased to $7.471 billion.(10)

Second, Hong Kong, a hub for foreign ventures in the Pacific Rim,(11) is scheduled to revert to PRC sovereignty in 1997.(12) Hong Kong is one of the most prosperous economies in the world in part because of its commitment to a free market economy and to the application of the rule of law in business practice.(13) The concern is that when the PRC takes over Hong Kong, Hong Kong's relatively effective legal system will be replaced by one resembling the PRC's.(14) The comments of a U.S. judge in a recent wrongful death case exemplified these fears.(15) Holding that the case could be tried in the United States, the judge noted that "the uncertain future of the Hong Kong legal system, given the island's reversion to Chinese sovereignty in less than two years, counsels heavily in favor of jurisdiction to ensure that the [plaintiffs] have an opportunity to obtain redress, if any be appropriate, for the grievous loss they have suffered."(16)

The judge's comments reflect the belief of many experts in the United States and Hong Kong that the rule of law will be eroded in Hong Kong after the island reverts to Chinese sovereignty in 1997.(17) Erosion of the rule of law would expose companies in Hong Kong and those that deal with them to the same risk of contractual non-enforcement as that faced by companies currently doing business with or in the PRC.(18) Further, Hong Kong is a major source of free and unrestricted economic information concerning the PRC.(19) Some speculate that this source of information will dry up after reversion, thus increasing the risk of investing in mainland China.(20)

The adjudication of contractual disputes according to the rule of law is extremely important to the international business community because the PRC is an attractive market and adjudication according to the rule of law significantly increases the predictability of contractual enforcement.(21) However, because the law traditionally has been viewed from an instrumentalist perspective in the PRC.(22) the question has been raised of whether, given the PRC's current system of government, the law can ever be the kind of overlying, guiding principle that makes contractual enforcement predictable. The goal of this Note is to answer this question, at least with respect to the PRC's Foreign Economic Contract Law (FECL), which governs disputes between enterprises of the PRC and foreign businesses.(23)

II. THE RULE OF LAW RULE BY LAW AND CONTRACTS

In the West, a key characteristic of a "civil society" is autonomous economic organization and transactions. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Contract Law in the People's Republic of China - Rule or Tool: Can the PRC's Foreign Economic Contract Law Be Administered According to the Rule of Law?
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.