China and Its Many Laws

One of the misconceptions I am always fighting about China is that it has no laws. Even people who should know better are often guilty of assuming there is nothing on the China law books to cover a particular business law matter. Their assumptions oftentimes stem from their having seen companies act in so many different ways, leading them to conclude there is no one right way.

There usually is one right way and if you are a foreign company, your best bet is to know and follow the law.

One of the problems businesses face in China is too many laws, some of which conflict with others.

In Do Too Many Rules Erode the Rule of Law? The Wall Street Journal China’s “too many rules” phenomenon and muses on the results:

It’s not a new revelation that China has a lot of rules.

Last year, there were rules for Beijing residents during the Olympics, and also rules for foreigners who came to town for the games (57 of them!)

This year, in Hubei province, a county government infamously ordered local officials to smoke locally produced cigarettes, while civil servants in the southwestern city of Kunming were ordered to learn 300 English sentences and 100 sentences in Lao, Burmese, Thai and Vietnamese, apparently to promote tourism in the region.

Today’s New York Times looks at some even more bizarre manifestations of rules run amok, such as an edict requiring schoolchildren to salute all passing vehicles on their way to and from school, and the Chongqing rule that “forced unmarried women to pass a chastity test before receiving compensation for farmland appropriated by the government.”

A potential side effect of so many seemingly arbitrary rules is that people may feel more inclined to skirt rules that they disagree with, or are simply too cumbersome to follow on a regular basis, fueling a culture of rule-bending and ignoring.

Not only does China have so many rules/laws, but they change faster (by about ten-fold) than any other country. I previously wrote on this inChina: Change is a Constant and in China’s Internet Censoring. Hate To Say I Told You So, But I Told You So….

I agree that having too many laws that people skirt leads to a denigration of the rule of law, but I fear the Chinese government likes things pretty much as they are. There is a Russian story I always tell that illustrates why I believe China likes so many laws. Many years ago, an executive of a well known company called me for my views as to how it should handle going into Russia via Moscow. I called a Russian client of mine for the answer. This client is Russian and this client has been doing business with the very top echelons of the Russian government for about 30 years. He told me that this US company needed to win over Moscow’s mayor or something would go wrong. He told me he assumed the US company would not want to pay a bribe and he said Moscow’s mayor is not going to be interested in that anyway. But, he said this company needed to do something very public to let Muscovites know their mayor had been looking after the people in allowing this company to come in. My client suggested this American company donate a large sum to a local hospital or orphanage and publicize it with a big ceremony at which the mayor would be the honored guest. He said if this company did not do something like this, they would surely find themselves bogged down in some sort of lawsuit involving noise restrictions or something like that.

I passed this information on to the executive, who made clear to me that his company never operated that way anywhere in the world. When I pointed out that his company had yet to go into any place like Russia (they were at that time mostly in places like Spain, the UK, France and Germany) , he poo-poohed me. Fast forward about a year and the American company ended up getting bogged down in a lawsuit my client insisted would have been handled within weeks not years had this company done what he had prescribed for them.

Which gets me back to my theory on too many laws. The more laws, the more likely one is to be in violation of one of them. And if everyone is in violation of a law, then everyone is beholden to the good graces of the government to avoid being fined or jailed.

I agree with this WSJ post that the Rule of Law is coming to China, but only ever so slowly.

What do you think?

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