Law, Trust & Institutional Change in China: Evidence from Qualitative Fieldwork

Ding Chen, Simon Deakin, Mathias Siems and Boya Wang

Working Papers from Centre for Business Research, University of Cambridge

Abstract: China’s rapid growth in the absence of autonomous legal institutions of the kind found in the west appears to pose a problem for theories which stress the importance of law for economic development. In this paper we draw on interviews with lawyers, entrepreneurs and financial market actors to illustrate the complexity of attitudes to law and economic growth in contemporary China. In the case of product markets, business relations are increasingly characterised by a mix of trust-based transacting and legal formality which is not fundamentally different from practice in the west. Financial markets are less like their western counterparts, thanks to the preponderant role of government in asset allocation, and a lack of transparency in market pricing. However, in both sets of markets we find evidence of a transition from inter-personal trust (guanxi) to impersonal transacting, and of growing demands from business and legal groups for the impartial application of legal rules and market regulations. China’s experience does not suggest that law is irrelevant or unrelated to growth, but that legal and economic institutions coevolve in the transition from central planning to a market economy.

Keywords: Chinese law; new institutional economics; law and finance; law and development; guanxi (search for similar items in EconPapers)
JEL-codes: G38 K12 K22 (search for similar items in EconPapers)
Date: 2016-12
New Economics Papers: this item is included in nep-cna and nep-law
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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