A Tale of Two Chinese Courts: Economic Development and Contract Enforcement
| Date | 01 September 2012 |
| Published date | 01 September 2012 |
| DOI | http://doi.org/10.1111/j.1467-6478.2012.00590.x |
JOURNAL OF LAW AND SOCIETY
VOLUME 39, NUMBER 3, SEPTEMBER 2012
ISSN: 0263-323X, pp. 384-409
A Tale of Two Chinese Courts: Economic Development and
Contract Enforcement
Xin He*
The way in which formal contract enforcement becomes effective is a
critically important but understudied question for law and development
studies. Primarily drawing on field investigations, this article com-
pares the enforcement performance of two basic-level courts in China,
one in a more-developed and the other in a less-developed region. The
level of economic development is found to be crucial in contributing to
the courts' performance. Unlike the court users in the less developed
area, those in the more developed area become more market-oriented
as the local economy diversifies, paving the way for more rigorous
judgment enforcement; a developed local economy also allows the
court to strengthen institutional building and staff professionalism. The
comparison of the two Chinese courts provides empirical evidence with
which to evaluate the relationship between formal contract
enforcement and economic development.
While contract enforcement by Chinese courts has been regarded as
notoriously difficult,
1
several recent studies have challenged this long-held
384
ß2012 The Author. Journal of Law and Society ß2012 Cardiff University Law School. Published by Blackwell Publishing
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*School of Law, City University of Hong Kong, Tat Chee Avenue, Kowloon,
Hong Kong
lwxin@cityu.edu.hk
This research is supported by a GRF grant from the Hong Kong government. The author
has benefited from comments on earlier versions of the article by Donald Clarke, Kevin
Davis, Kathryn Hendley, Yang Su, Frank Upham, three anonymous Journal reviewers,
and the participants of a workshop at NYU Law School in April 2008.
1 D.C. Clarke, `Power and Politics in the Chinese Court System: The Execution of Civil
Judgments' (1996) 10 Colum J. of Asian Law 1±125; M. Pei, `Does Legal Reform
Protect Economic Transactions? Commercial Disputes in China' in Assessing the
Value of Law in Transition Economies, ed. P. Murrell (2001) 180±210; M. Trebilcock
and J. Leng, `The Role of Formal Contract Law and Enforcement in Economic
Development' (2006) 92 Virginia Law Rev. 1517±80, at 1519; M. Moser (ed.),
Managing Business Disputes in Today's China: Duelling with Dragons (2007); J.A.
belief. Drawing on the national statistics for three types of formal contract
transactions, Yu and Zhang,
2
for example, argue that commercial parties are
able to use formal legal enforcement mechanisms to provide contract
protection. Empirical studies based on randomly selected cases also suggest
many positive developments in enforcement.
3
Whiting, for instance, finds
`the courts play a moderately important role in the strategies firms employ',
4
and `courts are not as completely flawed as they have been portrayed' and
`are an increasingly important element in the process of dispute resolution.'
5
A study on property and commercial litigation contends that `Shanghai
courts appear to be performing relatively well in that the final outcome
matches most corporate litigants' expectations of a subjectively fair and
positive outcome.'
6
Another researcher suggests `the enforcement situation
. . . seems fairly good; and local protectionism . . . seems to be contained
within legal rules.'
7
As the evidence suggesting these positive developments continues to
emerge, l ess explo red, howe ver, are t he mechan isms behi nd these
developments. Michelson and Read,
8
in asserting the powerful influence
economic development has on the legal system, admit that their survey data
do not allow them to identify concrete mechanisms behind the association.
Whiting only mentions the issue in passing; she speculates that the reasons
for the increasing importance of the courts in dispute resolutions are because:
[C]ontracts are often not grounded in social networks, but rather occur more at
arm's length. Institutional alternatives to courts . . . appear to be unavailable .. .
The role of the government bureaucracy in directly supervising contracts has
declined markedly.
9
385
Cohen, `Reforming China's Civil Procedure: Judging the Courts' (1997) 45 Am. J. of
Comparative Law 793±805; S. Lubman, Bird in a Cage (1999).
2 G. Yu and H. Zhang, `Adaptive Efficiency and Financial Development in China: The
Role of Contracts and Contractual Enforcement' (2008) 11 J. of International
Economic Law 459±94.
3 R. Peerenboom, `Seek Truth from Facts: An Empirical Study of Enforcement Arbitral
Awards in the PRC' (2001) 49 Am. J. of Comparative Law 249±327; M. Pei et al., `A
Survey of Corporate Litigants in Shanghai' in Judicial Independence in China, ed. R.
Peerenboom (2010); X. He, `Enforcing Commercial Judgments in the Pearl River
Delta of China' (2009) 52 Am. J. of Comparative Law 419±56.
4 S. Whiting, `Contracting and Dispute Resolution among Chinese Firms: Law and Its
Substitutes' in Dynamics of Local Governance in China during the Reform Era, eds.
T.K. Ling and Y.H. Chu (2010) 181±224, at 193.
5 id., p. 210.
6 Pei et al., op. cit., n. 3, p. 227±8.
7 X. He, `Debt-Collection in the Less Developed Regions of China: An Empirical
Study from a Basic-Level Court in Shaanxi Province' (2011) 206 The China Q. 253±
75, at 273.
8 E. Michelson and B.L. Read, `Public Attitudes toward Official Justice in Beijing and
Rural China' in Chinese Justice: Civil Dispute Resolution in Contemporary China,
eds. M. Woo and M. Gallagher (2011) 169±203, at 195.
9 Whiting, op. cit., n. 4, p. 210.
ß2012 The Author. Journal of Law and Society ß2012 Cardiff University Law School
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