Academic journal article Asia Pacific Law Review

Regulatory Reform in China and the EU: A Law and Economics Perspective

Academic journal article Asia Pacific Law Review

Regulatory Reform in China and the EU: A Law and Economics Perspective

Article excerpt

Regulatory reform in China and the EU: a law and economics perspective, Stefan E. Weishaar, Niels Philipsen and Wenming Xu (eds), Cheltenham, Edward Elgar, 2017,288 pp., GBP 85.50 (hardcover), ISBN: 978-1-78536-853-0

Edited by Stefan E. Weishaar, Niels Philipsen and Wenming Xu, this volume is an output of collaborative efforts that bring together a group of both established and emerging law and economics scholars from China and the European Union (EU). The volume makes a timely contribution to existing scholarship in several crucial ways. First, although this collection originated from a series of conferences held between 2012 and 2015, many of the debates engaged in by contributors, and in particular the overarching theme of this book, turn on the role of the Chinese government in directing the behaviour of market participants at home and abroad, a structural problem lying at the heart of today's Sino-US trade war.1 By virtue of several critical assessments of the Chinese regulatory interference and its broader implications, the volume brings our understanding of this topical issue to another level. The issue areas featured therein - financial markets, social and administrative regulations, and environmental regulation, make this volume valuable to not only those who are concerned about the Chinese model of governance in general but also those who have been closely following these specific topics. In my view, the book's contents are especially relevant to debates on the financial and environment sectors. The book's in-depth analysis of China's banking industry and securities market prompts readers to reflect on the impacts of both market and regulatory failures on a nation's financial industry and its cross-border ramifications, as seen with the Global Financial Crisis (GFC) almost a decade ago.2 China's responses to environmental issues are proving significant, given President Trump's recent withdrawal of the United States (US) from the Paris Climate Agreement.3

The book's interdisciplinary approach is another salient feature. It moves away from the doctrinal approach by considering the role of the public and private sectors and their interactions from a law and economics perspective. Here, empirical data informs policymakers of the effectiveness (or lack of it) of existing regulatory frameworks, and helps to identify possible reform proposals. In this light, this volume is of both theoretical and practical value.

Turning to a closer examination of each chapter, in their introductory chapter, Wenming Xu, Stefan E. Weishaar and Niels Philipsen set the stage by offering a comprehensive recount of the major theories underpinning this volume. Built on the concept of the 'regulatory state' by Edward L. Glaeser and Andrei Shleifer, Chapter 1 begins by describing different governance models each serving a matrix of policy objectives. Among these objectives are 'the minimisation of social harm for market activities'. The editors point to a growing body of literature that has used this exact term to describe China, while acknowledging that today, even Americans and Europeans 'are more regulated than before'. Having engaged the socalled 'public interest' theory and identified information asymmetry, market power, externalities and free-rider problems as primary causes of market failures that may lead to regulatory intervention, Chapter 1 highlights the risk of 'regulatory capture' and relates it to the key literature on the 'private interest' approach to regulation and public choice. In addition to regulatory designs, Xu, Weishaar and Philipsen pinpoint the enforcement strategies which translate 'black letter law' into 'de facto deterrence'. They contrast private and public enforcement by considering hurdles like the collective action problem and the institutional capacity of regulatory agencies.

Building upon this conceptual framework, the rest of this book is divided into four parts. Part I consists of four chapters that concentrate on regulatory reforms in financial markets. …

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