Economic analysis of law in China

E E

ECONOMI C ANALYSI S

O F LA W I N CHIN A

Edited by

Thoma s Ege r

Michae l Faur e

Zhan g Naige n

Economi c Analysi s o f

L a w i n Chin a

Edited by

Thomas Eger

Professor of Law and Economics, University of Hamburg,

Germany

Michael Faure

Professor of Comparative and International Environmental

Law, University of Maastricht, The Netherlands

Zhang Naigen

Professor of Law, Fudan University Shanghai, China

DAI I!QC THAI NGUYEN

TKONG TAM HOC uftj

Edward Elgar

Cheltenham, UK • Northampton, MA, USA

© Thomas Eger. Michael Faure and Zhang Naigen 2007

All rights reserved. No part of this publication may be reproduced, stored in

a retrieval system or transmitted in any form or by any means, electronic.

mechanical or photocopying, recording, or otherwise without the prior

permission of the publisher.

Published by

Edward Elgar Publishing Limited

Glensanda House

Montpellier Parade

Cheltenham

GlosGL50 1UA

UK

Edward Elgar Publishing. Inc.

William Pratt House

9 Dewey Court

Northampton

Massachusetts 01060

USA A catalogue record for this book is available from the British Library

Library of Congress Cataloguing in Publication Data

Economic analysis of law in China / edited by Thomas Eger. Michael Faure.

Zhang Naigen.

p. cm.

Includes bibliographical references and index.

1. Law—Economic aspects—China. I. Eger. Thomas. 1949- II. Faure.

Michael (Michael G.) III. Naigen. Zhang. 1955-

KNQ440.E26 2007

343.51 07—dc22

2006102431

ISBN 978 1 84720 036 5

Printed and bound in Great Britain by MPG Books Ltd. Bodmin. Cornwall

Contents

List of figures and tables vii

List of contributors ix

List of abbreviations xi

Preface xiii

PART I BASIC FEATURES OF THE CHINESE ECONOMIC

SYSTEM

I A comparison of Chinese and European-style federalism

from a law and economics perspective 3

Thomas Eger and Margin Schiiller

2 The road to efficient taxation in China 29

Pierre Garello

3 Legal pluralism in the governance of transitional China 55

Jianwei Zhang and Yijia Jing

PART II SPECIFIC ASPECTS OF THE CHINESE LEGAL

SYSTEM FROM AN ECONOMIC PERSPECTIVE

4 The economics of competition policy and the draft of the

Chinese competition law 77

Roger Van den Bergh

5 The law and economics of professional regulation: what does

the theory teach China? 112

Niels J. Philipsen

6 Regulatory arrangements and incentives for opportunistic

behaviour 151

Anthony I Ogus

7 Special treatment (ST) firms and administrative governance

of capital markets in China 164

Julan Du, Lucy Liu Yajun and Soma M. L. Wong

8 Monitoring problems versus fiduciary duties in Chinese stock

companies: an economic and comparative analysis on

corporate governance 200

Qing- Yun Jiang

vi Contents

9 The stable self-enforcement and distribution of property

right: the right to virtual property in MMORPG 233

Jian Wei and Shanguo Xue

PART III CHINA IN THE WORLD ECONOMY

10 Intellectual property law and policy and economic

development with special reference to China 339

Anselm Kamperman Sanders

11 Economic analysis of compensation for oil pollution

damage in China 372

Michael Faure and Wang Hui

PART IV CONCLUDING REMARKS

12 Conclusions 307

Thomas Eger, Michael Faure and Zhang Naigen

Index 311

Figure s an d tables

FIGURES

2.1 The effect of an excise tax 34

2.2 (a) The debt-growth relationship 38

(b) Public debt and fiscal burden 39

2.3 (a) Central/local share of government budget revenues 47

(b) Central/local share of government expenditures 47

2.4 Spending and revenue of government levels (2002) 50

TABLES

1.1 Ownership structure of industrial enterprises 18

2.1 Fiscal indicators (percentage of GDP) 43

2.2 Tax revenue 44

2.3 Taxes and income 45

2.4 Share of central and local governments in major

expenditure items 49

7.1 Companies entering ST status during 1998-2003 171

7.2 Distribution of ST firms based on the ST reasons 172

7.3 Summaries of the share-restructuring ST firms 174

7.4 Characteristics of ST firms with share restructurings 175

7.5 Abnormal return for the short event window 179

7.6 Summary statistics for the long-term cumulative

abnormal return 180

7.7 Regression results on cumulative abnormal return 183

(a) Regression results with asset restructurings 183

(b) Regression results with share restructurings 184

(c) Regression results with share restructurings and

asset restructurings 185

7.8 Probit model regression for ST status and

restructuring plans 188

(a) Probit model regression result with asset restructurings 188

vii

viii Figures and tables

(b) Probit model regression result with share restructurings 189

(c) Probit model results with share restructurings and asset

restructurings

1 *™

7.9 Performance of ST firms before and after share

restructuring activities

7.10 Ordinary Least Squares (OLS) regression results on the

relations between operational performance and

corporate restructurings 195

192