Xianchu Zhang on the Transparency Challenge to China's Socialist Market Economy (Journal of Comparative Law)

"Transparency Challenge to China's Socialist Market Economy"
Xianchu Zhang
The Journal of Comparative Law,
2017, Vol. 12, Issue. 2
published in 2017

Introduction: Transparency has been recognised as a global norm in both governance of the state and functioning of the market economy. Some studies have suggested that by 2020 'market and business transparency will be universally accepted across the G20 countries and beyond as critical to economic resilience and sustainable value creation.'

     Recently, transparency in China has become a focal point in the international controversy on China's market economy status following the expiry in November 2016 of the 15-year transitional period (2001-2016) under Sec. 15 of the Protocol of China's Accession to the World Trade Organization (WTO). The United States (US), the European Union (EU) and Japan announced their decision not to grant China its coveted status as a full market economy because China's domestic laws and legal interpretations had not made sufficient progress towards their understandings of the standards of a 'market economy.'  Their concerns included serious worries about China's market transparency. China responded by launching a legal action in the WTO to fight for its claims in December 2016. As a result, China's market status, including its transparency condition, is going to be judged in due course within the WTO mechanism. 

     International concerns with China's lack of transparency have also been reflected in the International Monetary Fund (IMF) encouragement that China be more transparent in its foreign exchange operations, a joint expression of deep anxiety by major developed countries with China's new legislation on anti-terrorism, cyber-security and foreign charities for their potential to impede trade and investment, expression of disappointment in the recent Group 20 (G20) meeting for lack of transparency in China top leaders' explanation of the country's economic downturn and related governmental measures, doubts raised about China's claim to be a leading economy of the world given 'an alarming lack of transparency', and the criticism made of China's autocratic measures without transparency in dealing with its financial market shocks.

     Transparency has been long identified as one of the crucial benchmarks of a market economy, and the current paper critically examines the major concerns in this regard given that China sees itself as a market economy of a special kind - a socialist market economy.  These concerns include China's WTO commitments, renewed pledges made in recent years for further reform, and the institutional challenges to be faced in improving conditions for greater transparency.  The paper argues, however, that even after nearly 40 years of keeping with the authoritarian ideology of the Communist Party of China (CPC),  rather than in accordance with market demands.  As a result, there is a considerable institutional gap for the Party-State to overcome if China's economic rise is to be matched by general recognition of China as a leading economy in the world...