Flying Blind or Playing Smart: The Foundations of Law in China
Vol. 2, No. 6
June 1, 2000
To break the law in China can be a very dangerous and expensive proposition. Penalties can be harsh. The system is further complicated by the fact that the judicial system is not transparent, and even the same words mean different things to Chinese and to Westerners.
Traditional Chinese and Western concepts of law are based on fundamentally different assumptions. In order to understand the law in China, one must understand the thinking and assumptions that underlie the legal system. To do less is to fly blind a risky, time-consuming, and nerve-wracking exercise, especially for Americans who, more than any other culture, depend on the law to provide stability and predictability in life.
For better and for worse, the law influences almost all aspects of life in the US. Whether this is good for American society or not is a debatable point. But those who have grown up in the US have been subconsciously programmed to have significant expectations of the law and its role in society. To a very substantial degree, Americans depend on the law even as they criticize certain aspects of it. Americans turn to the law to provide everything from stability in the trading system (the Uniform Commercial Code/UCC) to answers about euthanasia. A seemingly frustrated US Supreme Court Chief Justice once asked rhetorically, "Why would you ask a bunch of lawyers about that [euthanasia]?"
No other society appears as legally oriented as the US. And because virtually every aspect of business is influenced in one way or another by the complex body of law that exists in the US, American business people frequently make business decisions within a conscious and unconscious mental framework of legalisms. But when US business people do business in China, legally oriented decision-making paradigms no longer serve them well.
A Time Of Rapid Change
China has made enormous progress since it began opening its market and modernizing its economy in the early 1980s. This is not to imply that the Chinese government and the Chinese people have done anything other than create very significant, very positive social and economic change within a very short time. But this very rapid rate of change has and will continue to create stress within Chinese society. Income disparity, rising crime, and the intense difficulties of reforming the economic and political system all pose very significant challenges. It is important to remember that no Chinese government has ever led a sophisticated, educated population on China mainland. It has simply never been done before - there is no rule book to follow. Thus the challenges facing China's leaders in this large, overly populated, diverse country are of a magnitude that no other political leader in the world has ever faced. This should not be underestimated by executives with policy formulation responsibilities in China.
The next five years will be crucial. Significant divisions of opinion and political philosophy exist within the Communist Party, between liberals and conservatives, between centrist and regional interests, between older and younger leaders, and between civilians and the military. Political infighting has the potential to undermine the stability of the nation; China's leaders realize this, and it is unlikely that they will allow things to get out of control. However, astute policy analysis will be a necessary core business tool for executives to wisely manage investments and operations in China. China is a rapidly moving, constantly changing, complex matrix of political, regional and economic interests. Reform of the legal and regulatory system is but one area where the necessity for reform is widely acknowledged but where no common agreement exists as to how and at what pace it should be reformed, other than that educational levels need to be raised.
China is very easy to misunderstand, as costly blunders by Western companies have demonstrated. Western visitors to China's more developed coastal cities such as Shanghai, a city replete with modern office towers and five-star hotels, can easily be misled into thinking that things and processes that look Western represent a Western way of thinking on the part of Chinese. They usually don't. But since the conscious mind really does function like a relational database, all human beings necessarily must interpret all data they acquire within the mental framework of their pre-existing mental models. They have no other choice. Thus, when Westerners hear the word "law," for example, they immediately and subconsciously associate that word with the Western model of law that exists in their own personal experience. Unless educated about other options, they do not think of the Chinese, legalist concept of law because there is nothing in their mental framework that will allow them to associate an unfamiliar concept with a word they assume means something else.
This simple but profound disconnect between experience and reality is why many Westerners have a difficult time understanding China; and why many of China's leaders, in turn, find dealing with the West such a difficult and at times maddening process. Westerners often misinterpret data presented to them because their pre-existing mental models or paradigms inevitably assign *Western* meanings to *Eastern* facts. The reverse is equally true for Chinese working with Westerners. Clearly, this misinterpretation creates significant opportunities for misunderstanding, flawed strategies and ineffective business processes. It is no exaggeration to say that as globalization continues and as global management becomes more and more an economic reality, cross-cultural understanding and true cross-cultural management skills will become a core business competence at least equal to other core competencies such as finance or strategic planning. Nowhere is this more true than for those who manage in China.
Preventing Chaos A Core Concept
For centuries, China's leaders have been obsessed with preventing chaos. Throughout its history, this very large, very diverse country has been beset by internal warfare, natural disasters, foreign invasion and similar destabilizing influences. In response, Chinese officials have attempted, with varying degrees of success, to bring order to society by trying to regulate almost everything and anything that can "go wrong". After the Chinese Communists took power in 1949, they too followed the pattern of trying to regulate every aspect of society, using their Party apparatus of cells, networks and individual members to control everything from military affairs to the most minute social details, down to determining which families could have a child. Though the modernization process has reduced both the ability and the desire of the government to regulate all aspects of society as it once did, the basic philosophy of most Chinese government officials remains constant: regulations equal social order.
The Legalist Philosophy of Law
The philosophical underpinnings of China's legal and regulatory mindset date back to the early formation of the Chinese State when Emperor Qin Shihuang (259 B.C. to 210 B.C.) established the first Chinese dynasty. The so-called legalist philosophers, such as Han Feize, postulated the legalist theory that the law was solely the tool of the emperor; and that the only legitimate use of law was to preserve the power of the emperor. In legalist philosophy, there was no standard based on the use of institutions or processes to protect the innocent; and there was certainly no suggestion that the law should regulate or limit the power of the ruler(s). Quite the opposite. Thus, the legalist underpinnings of Chinese law are quite different from the Western concepts of law, especially those rooted in British common law in which, since the signing of the Magna Carta, nobody is above the law, not even the King.
Clearly, the philosophical underpinnings of Chinese law and British common law are radically different. It necessarily follows that the way in which the Chinese and the American or British legal systems developed and presently manifest themselves would also be quite different; and indeed they are. This difference is more than an abstract history lesson. It is very important for Western business executives, especially US executives, to understand that when Americans and Chinese are talking about "the law" they are very often using the same words to talk about very different meanings and expectations of what "the law" is supposed to do.
Today, many Western executives and government officials complain about China's legal and regulatory systems, stating that laws are often applied inconsistently and that the entire system lacks transparency. Of course! China's legal and regulatory system was never intended to be transparent. The system was never intended to offer "equal opportunity" to anybody. The idea of a "level playing field" is considered childishly naive from the perspective of traditional Chinese legal thinking. Lack of specificity in the writing of laws and regulations and a lack of transparency in general is intended, within the context of the Chinese legal system, to give officials the flexibility to deal with complex and changing situations and environments. They can deal with the situation in a way that seems best to them at the time, based on their own best judgment, without being hampered by overly specific regulations and language. It is the very lack of transparency that gives the official a significant component of his or her power. Thus, within the traditional Chinese system, the official does not execute or implement the law; to some degree, he or she IS the law. Not surprisingly, many officials like it that way.
Ask Questions; Learn the Chinese Perspective
China's legal system will continue to be reformed along with many other parts of society. China's accession to the World Trade Organization (WTO) will accelerate reform of the regulatory system. But we are years away from a fully functional, modern legal system in China. And that system, however modern, will never be a Western look-alike, though it will have Western-style components such as the emerging commercial code. China is not and does not want to be a Western country. China's traditions, history and legal system will always be Chinese. The West must learn to cope with that reality.
© Copyright - Smith Brandon International, Inc.
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