Thomas Peter / REUTERS Security officers prepare ahead of the closing session of China's National People's Congress (NPC) at the Great Hall of the People in Beijing, China, March 2017.

China's Path Toward the Rule of Law

The Promise and Pitfalls of Its Forthcoming Civil Code

Earlier this month, at the conclusion of the annual meeting of its National People’s Congress (NPC), China moved one step closer to instituting a unified civil code. The body formally approved the General Principles of the Civil Law, which are guidelines on how laws governing all aspects of civilian life, from marriage to real estate ownership to personal injury, should be drafted, with the ultimate aim of completing the code by 2020.

Outside observers might be surprised that China has been able to operate at this level of economic activity without a formal civil code. Although China started developing a sophisticated commercial legal infrastructure in the 1980s, however, its other legal systems are still being put in place. With a growing influx of cases related to everything from family law to intellectual property to trusts and estates, the Supreme People’s Court has made clear that it is high time to build out and restructure the court system.

Establishing a civil code is an inherently political act. Some officials and legal scholars fear that by setting forth the rights protected by law, Beijing would open the doors to a “color revolution.” For example, Liang Huixing of the Chinese Academy of Social Sciences has gone so far as to equate formal rights of property and speech with “unchecked freedom,” which he fears could lead to an uprising similar to that in Ukraine in 2014.

LONG MARCH TO A CIVIL CODE

Indeed, it is in fact small wonder that China does not have a civil code despite multiple prior attempts to establish one. On several occasions when it attempted to do so, including in 1954, 1962, 1979, and 2001, process toward a civil code ground to a halt. During the Cultural Revolution, all official discussions about a civil code ended because of the chaotic political environment. In 1979, economic reform and the opening up of China provided unique impetus for a legal code, but there was too much disagreement among drafters about process and underlying approach. In 1986, the current General Principles of the Civil Law was enacted, and it still governs civil matters to this day. From a different era, the 1986 principles reflect a far different social sensibility from that of the general principles passed this month. Efforts to enact a civil code in 2001 encountered similar obstacles to those in 1979, with the Standing Committee of the NPC once again deciding that a stepwise approach was better than a comprehensive overhaul of the code.

This is not to say that the country has had nothing more than vague general principles and guiding case decisions acting as civil law. In the current system, there are laws governing separate aspects of what would make up a civil code, including a property law, the tort liability law, and the inheritance law. Given the overlap in subject matter, adjudication, and the like, navigating the existing set of laws can be confusing and lead to inconsistent outcomes. And so, at the Fourth Plenum of the Central Committee in October 2014, the Communist Party decided to commit to the establishment of a civil code.

Given the overlap in subject matter, adjudication, and the like, navigating the existing set of laws can be confusing and lead to inconsistent outcomes.

Now that lawmakers have agreed to general principles, specific laws governing property, contracts, tort liability, marriage, and inheritance need to be rewritten. The drafting process started late last year but will be accelerated so that the final first draft can be submitted to the National People’s Congress Standing Committee for a first read in 2018. In addition to creating new provisions, a significant amount of work will be devoted to reconciling the new civil code with existing laws.

As the legislative and bureaucratic machinery works out the minutiae of a full civil code, it is worth remembering the ultimate national goal of this legal infrastructure. When China began its modernization process in the early twentieth century, it looked to the German civil code, as established under Otto von Bismarck, as its model. According to Professor Richard Wong of Hong Kong University:

The German system had a distinctive communitarian character. It was the product of the Prussian desire to build up a rational state bureaucracy and a strong military command . . . and unite the many small states, principalities and cities in Bismarck’s Germany.

The parallels with China’s self-image are immediate: a vast bureaucratic state that emphasizes the collective good and effectively governs a country made up of disparate autonomous regions. That said, China’s current laws, the foundation of a civil code, reflect the Soviet conception of personhood. As Chinese society becomes distinctly less Soviet (and Prussian), it remains to be seen whether these models remain relevant.

THE NOVELTY OF PERSONAL RIGHTS

If a civil code reflects how a society views personhood, then it naturally also shows how those views have changed over time. As the free market aspects of China’s economy become ever more entrenched and its society becomes more dynamic, Chinese people’s lives have grown more complicated. Disputes over everything from marriage to commercial activities can no longer be handled within families or communities of people with deep ties to one another and a commonly understood set of rules. Thus, Beijing’s emphasis on the rule of law issues not simply from a desire to shore up the legitimacy of the current administration but also out of demand from citizens, who increasingly look to third parties to adjudicate disputes.

The newly adopted general principles certainly have their fair share of provisions directly responding to top concerns of the Chinese people. For example, citizens and companies are asked to consider the impact their activities will have on the environment. According to official Wu Qing, “Legislative efforts are needed to ensure civil subjects better fulfill their obligations in environmental protection.” And companies will now need to obtain some measure of consent from users before selling their private data to third parties. As much as cross-border cyber hacks coming out of China gain attention in the news, domestic hacking is even more pervasive, which laws on the use of digital data should help mitigate. Good Samaritans will be protected from liability, which will hopefully curb infamous national incidents in which strangers refuse to help someone in distress for fear of being punished for their good intentions.

Perhaps the most jarring acknowledgment of how much life has changed in China comes from the new provisions on family law. In the last 30 years, Chinese society’s emphasis on filial ties has been significantly tested with the rise in divorce and decrease in number of multigenerational families living together. The new general principles reflect the complexity of family life. Children will have a say in divorce custody battles from the age of six on (previously, the minimum age was ten). Unborn children will also have rights to inheritance and monetary assets, a testament to the contentiousness of inheritance battles as families have become wealthier but more fractured. At the same time, the general principles aim to preserve other aspects of filial relations. For example, migrant workers must improve care for their children when they move to a new city for work. Children must also generally provide better care for their parents once they leave home.

Family law will be the most obviously emotionally charged area of the new civil code, but officials and legal scholars rightly recognize that the most consequential area for civil life will be property law. Recognition of individual property rights would be an explicit contravention of the communist system. Although real estate continues to be one of the sectors with the highest growth in China, and people invest their newfound wealth in property because other investment assets such as stocks and bonds are too risky, most land is still owned by the government. Private property “owners” lease the land from the government and own the structure on top of the land. The leases run anywhere from 20 to 70 years, with a few hundred in four provinces set to lapse in the near future.

Another risk for property owners is that the government is able to rezone tracts of land for development purposes without compensating the owners. Zhang Lifan, a Chinese historian of Republican China, states that “even with the passing of the property law, forced demolition cases still abound, and many such violations have taken place in the name of the state.” The new general principles state that the taking of land must be compensated through both “fair” and “reasonable” means. Legal scholars are hopeful this new wording means owners will receive market value for their property, but whether that will happen remains unclear. Since uncertainty in the real estate market contributes to uncertainty about the health of the greater Chinese economy, these legal rights must be sorted carefully.

Further, “property” as a legal category does not cover real property alone. With the rise of financial technology, people may also own Bitcoin and tokens won in online games. The People’s Bank of China plans to issue digital currency for the first time this year, lending further credence to the legal status of new asset classes.

Latent in this entire discussion is an uneasy awareness that individual property rights are the basis from which other individual rights are derived. Or, at least, that is how Western legal canon interprets such rights and how conservative Chinese legal scholars such as Professor Liang see matters. For now, China is eliding that fact and focusing on the economic benefits of establishing property rights. In fact, Sun Xianzhong, a researcher at the Law Institute of the Chinese Academy of Social Sciences, credits early efforts at a civil code in the 1950s with showing “the public that citizens have civil rights. You can imagine how it contributed to the emergence of the market economy.” He continues: “Civil law such as the [general principles] protects a citizen’s ambition to make money and inspires the confidence and passion to pursue wealth.”

THE FUTURE OF CHINESE LAW

Ultimately, the most important contribution of a comprehensive civil code will be not its actual substance but the process by which it is adopted. The most critical step will be enshrining a culture in which people turn to law to resolve disputes and begin to think of law as reflective of their own mores. For that reason, Li Jianguo, vice chairman of the NPC Standing Committee, introduced the draft of general principles at this year’s annual meeting as “an encyclopedia on social life” that will “better protect the people’s immediate interests, improve state governance, maintain market order, ensure trading security, and promote the sound development of socialist market economy.”

And how will the government make sure that it has an accurate read on social life? Although there is no direct democracy, Beijing solicits online comments from the public on new pieces of legislation and takes these into account when drafting, particularly in the area of property law. For the general principles alone, the National People’s Congress received 70,000 recommendations. The general principles are simply the preamble to the civil code, and officials anticipate many more comments for the laws themselves. The more robust this process is, the more effective and, frankly, the more uniquely Chinese the civil code will be. And a unified civil code, in turn, will bring China that much closer to establishing the rule of law.

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