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BEIJING -- China's leadership is stepping up its efforts to build a legal
system that can handle the demands of a complex, market-driven economy, as
managing the fast-growing nation becomes increasingly challenging.
That program will take the spotlight when China's legislature opens its
annual session on Monday. The National People's Congress is scheduled to
consider, and most likely pass, two crucial pieces of economic legislation. One
would give private property new protections of unprecedented force and detail
for China; another would require foreign and domestic companies to pay the same
rate of tax.
The property-rights law will be a symbolic milestone for the still nominally
Communist nation, even though it falls far short of what more liberal reformers
had initially advocated. For foreign businesses, the tax law will put them on a
more-equal footing with local competitors, as it gradually brings an end to most
of the special breaks offered in the past. Several other important laws will
also be discussed at the meeting for passage later this year, including the
country's first antitrust legislation and a measure that would give workers more
say in contracts with their employers.
All of these are the building blocks of the legal infrastructure that
underpins the daily functioning of a market economy, although the country's
legal code is still in its infancy and legal redress can be difficult to come
by. Many of these laws have been in the works for years, and have provoked
sometimes heated debate. They are coming to fruition this year as a consensus
grows that the new legislation can fill some gaping holes and rectify obvious
inequities in the current system.
"China is, step by step, going down the road of the market economy," said
Sheng Jiemin, an expert on antitrust legislation at Peking University. "The
government had to revise many laws after China joined the World Trade
Organization. And other necessary measures are being regularly issued."
The annual meeting of the National People's Congress, when nearly 3,000
delegates gather in Beijing, is one of the few occasions when China's leaders
discuss their policies in public. Given the turmoil in China's stock markets
this week, as fears spread that a government crackdown on speculation was
imminent, this year's meeting is likely to be particularly closely watched for
signals on financial policy, as well as progress in lawmaking.
China's economy has been changing much faster than the legal system that is
supposed to govern it. Huge numbers of Chinese now own their own homes and run
their own businesses, but it is difficult to settle precisely who owns what and
what they are allowed to do with it.
Private-property rights, in the abstract, have been recognized in China's
constitution through a series of amendments, the earliest in 1988. But those
vague principles are of little help in handling specific cases, such as the
government's frequent confiscation of land for development. That is a big reason
for passing the property-rights law, which details the scope of different types
of rights and sets rules for how to change or transfer them.
"The property-rights law tells you what is yours and what is his, and how it
can be obtained or transferred. Without that, it's impossible to solve property
disputes," said Mei Xiaying, a professor at the University of International
Business and Economics in Beijing. Businesses in particular will welcome the
clarification of property rights, which should make it easier to buy and sell
major assets such as land, he said.
The legal overhauls have been controversial: The proposed property-rights
law, in particular, attracted vocal opposition from leftist scholars who worry
that it will pave the way for the accelerated privatization of state companies
and widen the gap between the wealthy and the poor.
The draft antimonopoly law, under discussion for more than a decade, has also
been held hostage by disputes among policymakers. Some want to use it to break
open still-closed parts of the economy, while others see giving the government
new antitrust powers as a way to strengthen its control over businesses --
particularly powerful foreign companies that have dominant market share in
China.
Though its laws aren't subject to popular vote, the Chinese government does
usually try to build a consensus among its officials before pushing through a
major policy change. The property-rights law had been scheduled for passage at
last year's meeting before a critical backlash took it off the agenda, and even
the less-sensitive tax overhaul has been held up for years. Changes were made to
the draft laws last year to address the criticisms.
With those laws having now been declared ready for passage, 2007 is shaping
up to be a landmark year for legislation governing the economy -- after several
technical measures, including China's first code for corporate bankruptcies,
were passed in 2006. As all these new laws fall into place, scholars say,
China's commercial code is finally getting close to completion.
The new measures will reinforce China's shift toward relying on law and legal
processes, rather than government dictates alone, to manage the economy -- an
ideal that has been endorsed by the highest levels of the leadership.
In a major speech late last year, the Communist Party's top law-and-order
official, Luo Gan, said the government needs to "get better at using legal
methods to harmonize economic relationships." If the legal system can help
citizens settle their problems with employers, schools, and hospitals, he said,
that promises to "fundamentally reduce social conflicts triggered by the
conflict of interests."
Mr. Luo also appeared to recognize the importance of fairness in encouraging
companies and individuals to turn to the legal system to resolve their disputes,
saying it should "protect equally the legal interests of all types of market
participants, [and] eliminate the appearance of bias in law enforcement." In
practice, court decisions are heavily influenced by the government, and it is
often difficult for individuals to use the legal system to counter official
government actions.
All that doesn't mean Mr. Luo and other leaders endorse the idea of an
independent judiciary. Party leaders say their goal is to "rule the country
according to law." The idea is for the Communist Party's to exercise its power
through the legal system, not just arbitrary commands, but it doesn't mean the
party's authority is itself subject to the judgment of the law.