The Coordination Of Laws Regulating Foreign-Related Economy

This thesis focuses on the laws regulating the foreign related economy (hereinafter referred to as"foreign economic laws") of China after China's accession to the World Trade Organization (hereinafter referred to as"WTO") in the context of globalization and modernization. The key point is that the foreign related economy should be regulated by law as the main method, with rationality and modesty highlighted with the philosophy of coordination and planning to promote the dynamic equilibrium between regulation and liberalization, and between economic security and efficiency.Focusing on the above core perspective, this thesis is composed of six chapters, with the first three chapters discussing the general concept, while the last three chapters examining some specific fields. The last part briefly summarizes the thesis.Chapter I introduces the background and historical missions of the transformation of the foreign economic laws, providing the social context of the research. Chapter II explores the concepts, principles, innovative notions, and model changes of the regulatory transformation. Briefly summarizing the impact of the economic globalization and China's entry into the WTO upon China's regulatory system, Chapter III attempts to deduce the basic idea of how to improve the foreign economic laws. Chapter IV studies the relationship between the competition policy and the trade policy based on the fundamental principle of the market economy, i.e., the principle of competition, while Chapter V analyzes the coordination among the regulations on industrial policy, trade, and investment, which emphasizes another fundamental economic policy, i.e., the policy of industrial development. Chapters IV and V both discuss the substantive economic issues while Chapter VI takes a wider view to examine the coordination of regulations upon foreign related financing, including capital controls, the reform of the RMB exchange rate formation mechanism, and the introduction of strategic investors to banks.Both the theoretical and empirical approaches, and the methods of both historical and comparative study are applied in this thesis. The author also endeavors to integrate economic and legal research methods, implement the materialist dialectics, polysystem theory and pursue a scientific outlook on development. The author's preliminary conclusion on the harmonization of the foreign economy laws in China is based on the relevant domestic and foreign theories in this field.1. Under modernization and globalization, the reformation of the foreign economic laws shall establish a coordinated"normative regulatory system."The modernization of China is backed and driven by the reform of market economy and the opening-up policy. The foreign economic laws are part of the economic regulatory system, which takes law and policy as the main intermediaries and is closely linked to Globalization and Modernization. These two propositions form a"dumbbell"structure, where regulations at one side and Globalization and Modernization at the other side. The orientation and fundamental of regulatory transformation is to be conducive to the realization of modernization and coping with economic globalization by innovation. Modernization and globalization form the significant background of our regulatory innovation.The control of foreign-related economy is a long-term transitional process. In the long run, the domestic economy and foreign-related economy have their own characteristics, and the special characteristics of foreign related economy require special regulatory measures. However, after China's entry into the WTO, China's economy is integrating into the international economy, as a result, the boundary of domestic economy and foreign related economy becomes increasingly blurred. The specific features of the regulations upon foreign related economy are gradually fading away.In addition to the economic entities, the governance structure, means and competency of regulatory authorities, and the comprehensive legal system that correspond to the competitive market mechanism are also the components of the"normative governance system in a broader sense."The"normative governance system"here consists of those governance modes such as corporate governance in a narrower sense, community governance, self-regulation, administrable governance, which are developed by due process with mandatory rules and disciplinary penalties as its basis (normative element), and with the public institutions (element of social entity) and a structure of checks and balances (element of democratic institutions).Transformation of the foreign economic laws should be aimed at"good governance", i.e. the coordination and harmonization of institutions and mechanism. The essence of the transformation is to reform the rules of regulation and the operation model. In the post-WTO era, the proportion of foreign-related economy is gradually increasing. The integration of domestic economy and foreign related economy reflects the Chinese version of the economic globalization. It requires a foreign-related economic management system and a sophisticated rule-based regulatory regime, which can satisfy the requirements for a long-term sustainable development of our economy. The author advocates that the objective of the transformation of foreign-related economy is to establish a coordinated"broad normative governance system."The market and the complex relationships between and among different countries require us to apply a proper legal system to effectively allocate the various resourcesII. The general principle of the reformation of foreign economic laws is innovative and coordinated development.Economic control falls within the governmental functions. When regulating foreign related economy, the government, in accordance with the laws, regulations, and the economic polices, supervises, manages, and controls the foreign-related economic activities. It is the extension of the governmental intervention and adjustment in the national economy.The foreign economic laws are synthesis of the country's micro-management and macro-adjustment to its foreign-related economy. It plays an important role in implementing one country's foreign economic policy, maintaining foreign economic order, promoting fair competition, safeguarding the national economic security, and helping overcome the market failures.The basic principles of foreign economic laws are: rule by law, principle of modesty, principle of coordination and harmonization, and principle of efficiency.The fundamental idea of the transformation of foreign economic laws is an idea of innovative, coordinative, and harmonized development. Accordingly, the foreign economic laws should reflect the ideas of centered-upon-legal-policy, co-ordination and harmonization, risk management, and competitive regulations. Among them, the idea of"centered-upon-legal-policy"is not directed to address the tension between rule by law and rule by man with Chinese characteristics. Legal policy refers to the basic ideas, principles, and guidelines of the strategic policies that a country applies in its legislation, law enforcement, and judicial performance. It is the essence of law that is embodied in the specific regulations and will be maintained for a long time. In the area of foreign-related economy, the idea of"centered-upon-legal-policy"is a fundamental idea that the legal policies should guide the regulatory activities and contribute to the establishment of a series of stable and basic policies of regulatory measures, thus enhance a systematic and transparent legislation. It is the extension and particularization of the"rule by law"in regulating the foreign related economy.The model changes of the transformation of foreign economic laws include the following concepts: (1) The legal form of foreign economic laws should be transformed from the current approach of"dividing and ruling,"to that of"internal and external integration"in order to promote the development of both"external oriented economy"and"overseas investment,"thus to enhance the equilibrium development of legal system. (2) The legal policy should also be transformed from the"free trade policy"to"free and fair trade policy,"from"investment restrictions"to "deregulating and re-regulating investment policy,"and from export incentives to a balanced development of both domestic and foreign related economy. (3) The legal function of the foreign economic laws should be transformed from being defensive to both defensive and initiative to strive for the nation's interests and to integrate risk preventions into innovation encouragements. (4) The institutional framework should be transformed from the centralized management model to the model of coordinated and unified management, and the regulatory measures should be transformed from administrative oriented to law oriented, in order to support integrated policy harmonization, and to apply cost-effective analysis and information management, etc., to regulate the foreign related economy by normative, updated, long standing, and diverse means. (5) The legal value should be transformed from the administration-oriented to market-oriented model, and promote the market based regulation by adjusting the pattern of interests distribution.III. The economic globalization challenges China's foreign economic lawsIn the context of globalization, the development of information technology, financial globalization, the erosion of sovereignty, and national security issues have greatly impacted on the foreign economic laws. The economic globalization requires each nation to carefully use the policies and legal instruments in utilizing and controlling the information technology, and attentions should also be given to the effects of financial globalization to the domestic financial markets.We should clarify the relationship between the law and particular policies for purpose of establishing a systematic set of rules on foreign related economy. We should also properly handle the relationship between economic stability and economic dynamism. The regulations upon foreign related economy shall balance the various parties'interests, and more importantly, check their negative effects. The economic globalization and China's entry into the WTO require us to accelerate the multifaceted development of our systems to promote foreign trade, foreign investment, technological innovation, economic restructuring, and institutional innovation as a whole.Entry into the WTO challenges the Chinese regulation system in foreign related economy fields, and the issues include that of unity, transparency, consistency, national treatment, and the countermeasures against the neo-protectionism. They are all new areas for regulations in post-WTO era. Based on the above points, this Chapter concludes that the government must have sufficient capacity to make full and reasonable use of the WTO rules and strive for the national interests because the benefits of globalization are not automatic or equally distributed.IV. The coordination of laws on the competition policy and the trade policyBoth competition policy and trade policy are fundamental economic polices of the state and serve the unified national development strategy, with the latter enhancing economic efficiency and consumer welfare through free trade and market liberalization, while the former advocating an open market and free trade in order to achieve economic efficiency and consumer welfare. Both policies, by their nature, pursue identical goals and are mutually supportive of the other.But in practice may conflict with each other for many different reasons. The coordination of the competition policy and the trade policy requires the match of strategy and tactics. Strategically, both of them must be consistent with the overall national economic and political strategic goals, and keep focusing on the national competency and the strategic interests. Tactically, the various domestic professionals should be encouraged to participate in the international rules making process, as well as the application of international rules, embodied in the treaties, conventions and cases, to domestic laws. It is important to learn how to take advantage of these processes to maximize the national interests. The ultimate goal is to create an dialectic institutional arrangements to promote the coordination of the competition policy and the trade policy.The coordinative measures include the following: (1) to expand the scope of the function of the trade policy to remedy the lack or functional weakness of the competition policy; (2) to harmonize the separate systems under the competition policy and the trade policy through domestic legislation; (3) to coordinate the conflict through international legislations. The thesis takes the coordination of competition policies in the European Union and the United States as an example to illustrate the bilateral policy coordination, and the WTO as an example for multilateral coordination of international competition policy. The international coordination of the competition policy is a trend, but different countries take different positions based on their different interests, which make it very difficult to handle. The author calls for a"Strategic Legal Policy Régime"consisting of the laws and policies which are crucial to the national strategy. These laws and policies, together with the competition policy and the trade policy, form an integral part, and are aimed at the sustainable development of the country. The author claims that the analysis of the legal policies shall consider the norms and interests, and should be subordinate to the value analysis.V. The coordination of laws regulating the industrial policies and foreign investment policesThis chapter discusses the relationship between the foreign trade policy and the industrial policy, and examines the process and the mechanism of the interactive relationship of the industrial policy, the foreign trade policy, and the foreign investment policy from the legal perspectives, seeking the solution of how to improve the industrial policy and how to coordinate among the different policies.In discussing the relationships among the policies of trade, foreign investment, and industries, the competition policy is being put forward as a reference. The foreign trade and the investment policies are strongly correlated to the industrial policy, which could be seen through the conflicts and their relaxations. The foreign trade policy and the foreign investment policy are playing remarkable roles in achieving, promoting, or even replacing industrial policy. This chapter further develops the idea of"Economic Policy Magic"to explain the necessity of coordination of the policies, where the regulations are crucial.The second section of Chapter V reviews the historical development of the industrial policy and the framework of the industrial regulations in China. The third section discusses the co-relationship of the trade policy and the industrial policy, which includes the promotion of the trade policy to the industrial structural adjustment, and the coordination of the infant industry, strategic industry, and the trade policy. The fourth section further discusses the relationship between the foreign investment policy and the industrial policy. The fifth section argues the relevance of foreign investment policy and economic security, and concludes that a neutral position is necessary in regulating foreign investments in order to ensure the industrial security.As Friedrich List says,"The power of producing wealth is therefore infinitely more important than wealth itself."The improvement of the foreign-investment-structure requires the coordination of diverse policies to enhance the harmonization of resources, environment, and society, and to promote sustainable development. To this end, the policies under rule of law guided by the perception of a scientific outlook of development are highlighted.VI: The coordination of foreign related financial lawsThis Chapter discusses some issues that have currently attracted much attention in China, such as the foreign investment in Chinese banks and the changes of the RMB exchange rate, in order to address the problems of the coordination of regulations arising from the process of re-constructing the financial institutions as well as the price control of the financial assets on the financial market.The key point in the coordination of the foreign economic laws is to satisfy the needs for financial globalization, information availability, liberalization, and comprehensive operation, and to rationally perceive the financial risks and efficiency, to establish a proper system and mechanism, to make and amend the basic financial laws in a timely manner, to repeal the out-of-date financial administrative regulations and rules, and to formulate a sustainable self-improved system of financial laws. The re-construction of financial institutions is but a measure instead of the goal, and the regulations on foreign-related finances should seek the balance between financial security and efficiency.This Chapter attempts to discuss the relationships among the monetary policy, foreign exchange policy, and trade policy, stressing on the necessity of coordination of the above polices, from which it continues to examine the transformation of the foreign capital control and the RMB exchange rate formation mechanism. The reality that people try to evade the foreign exchange control promotes the liberalization of capital flow. The author reviews the evolution of the capital control, discusses the conditions of its transformation, analyzes the essence of the pressure of the increase of RMB's value and its accompanying risks, and summarizes the relationships among the financial assets'price, financial development, and capital risk control. These discussions prove the importance of the coordination of foreign exchange control, foreign trade, and monetary policies.This Chapter also discusses the relevant WTO rules and the opening of financial service industry to foreign market. It introduces the international background, laying a foundation for the further research on the re-construction of financial institutions.Another focus of this Chapter is the coordination of laws regulating the re-construction of the financial institutions, taking as an example the banks that receive foreign capital investment. Among others, it studies the legislative process of banking reformation and foreign invested financial institutions, as well as the international practice, the relevant arguments on the policy goals, principles, and standards. After the extensive analysis, the author agrees that finances are part of the most important national resources; therefore, the entry of the foreign banks into Chinese market must comply with the basic principles that meet the national condition. In reality, we must carefully balance the interests when considering permitting foreign banks to enter into Chinese market. Form the financial reformation perspective, foreign investment is a form of reformation of ownership of financial assets, therefore, we should try to maximize the benefit out of it and avoid the possible negative effect, and a strong regulation and coordination may do it.Based on these analyses, this Chapter examines the balance of financial efficiency and security, and concludes that it is necessary to establish a coordination system to strengthen financial regulation policies.VII. SummaryThe last part of this thesis is a brief summary. The control of foreign related economy needs a comprehensive coordination system, conceptually, and practically. The coordination of the foreign economic laws, the trade policies, the competition policy, as well as the foreign trade and investment policies should all be coordinated with each other in order to formulate a perfect strategic legal system. The core of the foreign economic laws is the interactive regulation instead of mandatory punishment. The coordination of foreign economic laws is a complex and comprehensive approach. In a word, deregulation and re-regulation in this area are closely related, and the process of deregulation is actually the process of transformation of the law.This thesis, as a brief review of what the author has studied during the past years, is just the first step into this field, and it may contain some arguable points. The author is expecting comments from the experts and scholars.