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White paper published on China's rule of law
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IV. Legal Systems Regulating the Order of the Market Economy

During the transition from a planned economy to a market economy since the adoption of the reform and opening-up policies in 1978, China has continuously strengthened its legislation in economic and related fields. A legal system compatible with the socialist market economy has basically taken shape.

-- Civil law system. China makes the confirmation, alteration, exercise, circulation, termination and protection rules of property ownership the core of its civil law system compatible with the building of a socialist market economy. A series of laws, such as the General Principles of the Civil Law, Contract Law, Security Law and Property Rights Law, have set up and improved the system of creditor's rights and property rights system that covers ownership, usufructuary right and property right for security of realty or chattel, established the principle of freedom of contract and the principle that property rights of the state, collective, individual or any other rights holder are equally protected by law, and formed a new pattern that all economic entities with different types of ownership lawfully coexist, equally compete and mutually enhance each other.

-- Legal systems for market entities. China's legal systems for market entities have been accommodated to the basic requirements of a market economy for market entities after the transformation from ownership-oriented legislation to one oriented toward the forms of organization and liabilities. The Company Law, Partnership Law, Sole Proprietorship Enterprise Law, Law on Commercial Banks, Law on Farmers Specialized Cooperatives and other laws guarantee the legitimacy of various market entities and their equitable participation in market competition. The Company Law establishes basic systems, such as the limited liability company system and the system of company limited by shares, and improves corporate governance structure, laying an institutional foundation for building a modern enterprise system and safeguarding the lawful rights and interests of corporate investors and stakeholders. The Law on Enterprise Bankruptcy set up the bankruptcy system, regulating the withdrawal from the market of market entities. China has also set up a great number of organizations offering legal, financial and information consultation services, and actively improves legal systems concerning market agents.

-- Legal systems for market management. The Anti-monopoly Law and Law on Countering Unfair Competition regulate market competition behavior, facilitate the reform of monopolized industries, intensify government and public supervision, and accordingly establish a legal remedy system combining civil and administrative compensation. The Law on the Protection of the Rights and Interests of Consumers and Product Quality Law have established a legal system for protecting the interests of consumers and for ensuring product quality. The Law on the Administration of Urban Real Estate has set up a system conducive to administering urban real estate, safeguarding the order of the real estate market and guaranteeing the lawful rights and interests of real estate owners. The Insurance Law, Securities Law, Law on Regulation of and Supervision over the Banking Industry, Regulations on Foreign Exchange Control, and other laws and regulations have set up a financial supervision and regulation system with open, fair and just value orientation, to effectively prevent and dissolve financial risks. The Regulations on Direct Selling Administration, Regulations on Commercial Franchise Administration and other regulations effectively regulate market behavior.

-- Legal systems for macro-control. Exercising macro-control over the economy by means of law is a major characteristic of China's socialist market economy. While giving full play to the role of the market mechanism in optimizing resource allocation, and for the sake of expediting the sound and rapid development of the national economy, the Budget Law, Audit Law, Government Procurement Law, Pricing Law, Individual Income Tax Law, Enterprise Income Tax Law, Law on the Administration of Tax Collection, Law on the Promotion of Small and Medium-sized Enterprises, and other laws put forth provisions on macro-control in their corresponding fields. The Law on the People's Bank of China and other laws provide an institutional guarantee for maintaining currency value, dissolving financial risks and ensuring financial security. The Statistics Law forms the legal foundation for scientific decision-making regarding national economic and social development. The construction of legal systems for macro-control effectively gives full scope to the guiding role of national development plans and industrial policies, and thus elevates the level of macro-control.

-- Legal systems for the protection of intellectual property rights. The enactment of laws such as the Patent Law, Trademark Law, Copyright Law and Law on Countering Unfair Competition, and the promulgation of a series of administrative regulations, including the Regulations on the Protection of Computer Software, Regulations on the Protection of Layout-design of Integrated Circuits, Regulations on the Collective Management of Copyrights, Regulations on the Protection of Dissemination of Information Through Internet, Regulations on Customs Protection of Intellectual Property Rights and Regulations on the Protection of New Varieties of Plants, have established relatively complete legal systems for the protection of intellectual property rights in their corresponding aspects. China adopts a law enforcement and protection mechanism for intellectual property rights through the coordinated implementation of judicial justice and administrative execution. Judicial justice has a fundamental status and plays a guiding role in the law enforcement and protection of intellectual property rights. The combination of investigation by law enforcement agencies in accordance with the law on their own initiative with mediation at the request of the parties concerned offers optional channels for the latter. The Interpretation of Issues Regarding the Specific Application of Laws in the Handling of Criminal Cases of Intellectual Property Right Infringement (I) and (II) enacted by the Supreme People's Court and Supreme People's Procuratorate of the People's Republic of China serve to crack down on crimes infringing intellectual property rights.

-- Legal systems for resource conservation and environmental protection. China regards resource conservation and environmental protection as two basic state policies, and continuously strengthens the building of the legal systems in these two aspects. China has enacted nine laws concerning environmental protection, including the Environmental Protection Law, Law on Environmental Impact Assessment, Law on the Prevention and Control of Atmospheric Pollution, Law on the Prevention and Control of Water Pollution, Law on the Prevention and Control of Environmental Noise Pollution, Law on the Prevention and Control of Environmental Pollution by Solid Waste and Law on the Prevention and Control of Radioactive Pollution, and 17 laws with regard to resource conservation and protection, such as the Renewable Energy Law, Energy Conservation Law, Land Administration Law, Water Law, Forest Law, Grassland Law, Mineral Resources Law, Coal Law, Electric Power Law and Clean Production Promotion Law. The state has also promulgated over 50 administrative regulations, more than 660 local and sectoral regulations as well as government rules, and over 800 national standards related to environmental and resource protection. It has established and improved legal systems by establishing environmental impact assessment, synchronous project design, construction and completion of safety and sanitation facilities, pollution discharge declaration and registration, pollution discharge fee, elimination or control of pollution within a prescribed period of time, control of levels of pollution and pollution discharge permission, and legal systems concerning the planning, ownership, permission, paid use and energy conservation assessment of natural resources. At the same time, China sets great store by international cooperation in resource conservation and environmental protection. It has acceded or joined over 30 international conventions on environmental and resource protection, including the United Nations Framework Convention on Climate Change, Kyoto Protocol on Global Warming, Convention on Biological Diversity and United Nations Convention to Combat Desertification, and actively performs its obligations under these conventions.

-- Legal systems for foreign economic and trade cooperation. A series of laws, such as the Law on Chinese-Foreign Equity Joint Ventures, Law on Chinese-Foreign Cooperative Joint Ventures, Law on Foreign-Capital Enterprises and Foreign Trade Law, provide multiple modes or organizational forms for foreigners to invest in China, and fully guarantee the lawful rights and interests of foreigners who invest and conduct economic and trade activities in China. Following its accession to the World Trade Organization (WTO) in 2001, China, by revising its Foreign Trade Law, has further standardized the rights and interests of foreign trade operators, improved the trade administration systems of import and export of goods and technologies, and international services, established foreign trade investigation and promotion systems suited to Chinese conditions, perfected the trade remedy system and improved the systems of customs supervision and inspection and quarantine of imported and exported commodities, to form a unified, transparent foreign trade system pursuant to the WTO rules. In light of the requirements for developing its socialist market economy and its commitments to the WTO, China has comprehensively straightened out laws and regulations concerning the utilization of foreign capital. Over the past six years, the state has sorted out a total of 887 sectoral regulations and other regulatory documents in the field of foreign economy and trade.

(China.org.cn February 28, 2008)

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