By Jim Hatch & Fengli Mu
It is natural for many commentaries on Canadian Prime Minister Stephen Harper's recent visit to China to focus on human rights. But when discussing China, the West must always be careful about bias. At a press conference with Harper, Chinese Premier Li Keqiang said, "China is a country under rule of law, and there is clear stipulation in Chinese constitutional law that human rights must be respected and protected." That comment generated more than a few Western scoffs. But the fact remains that Chinese leaders do care about law and order.
No nation has a perfect human rights record. The point of this blog is not to judge Chinese performance on that front. The point here is to simply point out that China does not lack laws. The challenge it faces is one of enforcement. And it is trying to improve.
Centrally planned economies such as China run on five-year plans that provide economic, social and political guidance to all public and private institutions and enterprises in the country. In China, members of the Communist Party Central Committee recently started holding meetings called plenums to set the direction for the nation's next five-year plan. Rule of law was the theme of the fourth session, which took place in late October.
Laws in China are passed by the National People's Congress, which is influenced by the Central Committee of the Communist Party and its seven-member Politbureau (headed by President Xi Jinping). Enforcement of Chinese laws, however, is entrusted to the police, prosecutors and judges.
Chinese judges have relatively little power compared to the police and prosecutors. But they make important legal decisions and there is a high degree of corruption involved in their decision making because judges are typically beholden to the local officials who appoint them. Furthermore, judges are also not ruled by case law that sets precedents for decisions, which means the decisions they make often seem arbitrary, unpredictable and opaque and are seldom subject to successful appeal.
This system often leads to violent protests. A conflict over land development in Yunnan, where more than 1,000 villagers recently clashed with enforcers working for developers, illustrates this problem. All land in China is owned by the government, which means developers reimburse local officials when farm land is appropriated for commercial use. The government pays farmers for lost land, but farmers don't participate in negotiations. And since all administration of land sales is handled by local authorities, it is relatively easy to make dodgy transactions appear legal. And turning to the legal system to seek justice is an uphill battle for farmers because the outcome is heavily influenced by the local officials. In Yunnan, a member of government allegedly negotiated a below market price for land in return for bribes. As a result of the outrage created, eight people were reportedly killed and 18 injured. And this is just one of many such incidents reported in the press.
China has initiated a number of reforms to confront these issues. The central government, for example, is vigorously pursuing convictions for bribe taking while requiring more disclosure of business dealings by local governments along with greater participation by the affected parties. The quality of judges is also being improved, with pay being increased and the appointment process shifted upward to provincial officials. More and better trained lawyers are being provided to help justice seekers.
The changes being introduced are not likely to result in a totally free and independent legal system because the system will remain under Party control, especially in politically sensitive areas. Nevertheless, the ruling party appears to understand that better establishing the rule of law is vital to China's future.
Jim Hatch is a Professor of Finance at Western University's Ivey Business School in London, Ont., who recently completed a study of the Chinese use of the case method in business education with Fengli Mu. A book on this topic will be published by Peking University Publishing House in 2015. Hatch and Mu are currently conducting research aimed at understanding the skill and knowledge gaps of Chinese managers. Jim can be reached at email@example.com.
Fengli Mu is a Professor of Human Resources at the Chinese University of Politics Science and Law in Beijing and a former visiting scholar at Western University's Ivey Business School. In addition to her academic work, she consults on a wide range of projects for Chinese companies.
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