In-class Group Discussion Questions

Class 2 In-Class Discussion Questions:

Q1: What is law? And where do laws come from?

  • Law is only a part of institution which provides the rules of the game to the society.
  • Formal laws are direct products of the political system. Law come out of the legislative body. In China, law come from the National People’s Congress, the political institution. The politicians will impose their preferences, ideologies, style of social control into lawmaking.
  • There are systematic differences among different country’s laws. Different legal system represents different style of social control. The common law is a style of social control that support private market outcomes. It aims to constrain the power of the government. It is the bottom-up kind of approach. In contrast, civil law represents social control style which is top-down, where the states want to impose its desires in resource allocation. There is less checks and balances because the state doesn’t want an independent court to constrain its power.

Q2: What is the purpose of (commercial) law? / Are laws important for economic growth / Why?

  • It maintains market order. Promote efficiency and economic development. build a more vibrant capital market.Regulate the international trade. Stimulate free competition and transaction,prevent the monopoly.
  • The importance of commercial law:keep market’s order; individual protection (customer right); tax and labor;investment.

Q3: What is good law? / bad law? Giveexamples and illustrate your answer.

  • If a law brings the maximum happiness to the most of the population, then it is the good law, regardless of what things people value most. Laws such as those to protect private property rights, and the freedom of contract are conducive to economic growth.
  • Laws and regulations that hinder market-based activities (e.g. by creating rents,administrative barriers, and unnecessary bureaucratic interference) are not conducive to economic growth.

Q4: Will countries’ laws become more homogenous or heterogeneous in the future? Why?

  • Different country has different livelihood issues, culture and believes. Then base on the unique problem, country should set up related regulation to control. Base on this believe, the country’s law should become heterogeneous in the future. For example, in china, the government insists work on socialist legal system with Chinese characteristics. For example, in US, each state has its own legislative power to control. In commercial area, such as Tax, it’s up to the government needs, then each state can set up the requirement by their needs.

Q5: What contents should a “Constitution” include? What is the legal nature of the Basic Law of HKSAR?

  • In constitution, the state set thefundamental rules for what the state thinking is the most important.  Constitution is fundamental and entrenchedrules governing the conduct of an organization or nation and establish itsconcept, structure, and character. A constitution should prove: the structurefor an organization; describe the purpose; define the duty of the officers andmembers. The key feature of constitution: entrenchment (e.g. Rule for amendingthe itself constitution); distribution of sovereignty; separation of powers;lines of ownership and accountability; states of emergency rules.
  • Legal nature of HKSAR: the basis lawof the HKSAR was enacted by the National People’s Congress. In accordance withthe Constitution of People’s Republic of China. It’s similar to amini-constitution for the HKSAR. “One country, two systems” that remainsunchanged for 50 years.

Class 3 In-Class Discussion Questions:

Q1: What is the role of courts in economic development?

  • Basically,the role of court is mainly to enforce the law. By enforcing the law, thecourts are ensuring that laws are credible. They will act in accordance withthe law.
  • Tobe specific, to protect private property right, to safeguard contract, to deterand prevent from property right contract freedom fraud.

Q2: Why courts need to be independent? And independent from whom?

  • Theprivate enforcement tends to favor those who are wealthier, more powerful. Thepublic enforcement tends to be captured by political interests. That is why weneed an independent court to mutualize the inequality between these twoparties. The court independent specifically means the court shall makedecisions based on (1) evidence (2) rule of law.
  • Courtshould be independent from the other parts of the government and thepoliticians. Also the court should be independent from the wealthier and morepowerful people. Third, the court should be independent from media influence,the superior and the peer influences. Independent judges should decide cases ontheir own.

Q3: What are the key differences between China court and Hong Kong court? Why are there such differences?

  • The key differences between China andHong Kong court are also the differences between the common-law bottom-upsystem and civil law top-down system. Judge appointment and qualificationsystem, judicial formalism, their level of judicial independence. Thecommon-law judges are more independent than civil law judges because the civillaw countries’ courts and judges are considered like judicial workers, thecommon-law judges are more professional on private market outcome, like HongKong. In China, it is central designed allocations.

Q4: How to evaluate a judge’s performance? List any criteria and methods of evaluation that you can imagine.

  • First, we should consider what is theobjective function of the CCP, who controls the legal political system.  China is a civil law system country, typicaltop-down system. As politician, they want judges to show their loyalty ratherthan act against them.
  • Second, judge must can help toresolve the disputes and stabilize the society, and be justice enough to havetheir own decision making with some degree of independence.
  • To be more specifically, you can use somedetailed features which can show the judges’ efficiency and justice.

Q5: Illustrate the background, objectives, and implementation of judge quota reform (法官员额制改革), will it change people’s perception of judges in China?

  • Background: from 2006 to now, the overallnumber of Chinese judge doesn’t increase much. It remains about 190000, but thenumber of cases growing up at the same period is from 8.5 million to over 17million cases per year. Judges have to face heavy workload, bad pay, lowprofessional standards, low social status, and the growing violent threats
  • Objectives: improving the efficiencywithin the existing system, by making people actually do their best can do.
  • Implementations: choose the elite judgesand let other people to be his assistants, and improve his pay. Thisimplementation also take lots of troubles like the standards of how to selectelite judges, in many courts judges are occupied by the senior people, notnecessarily better judges.

Class 4 In-Class Discussion Questions:

Q1: What is property rights? Why property rights are important for economic growth (Give three examples and illustrate your arguments)?

  • Basically, the property right is theright over property. It contains the right of ownership, utilization, disposal,the profit from the property.
  • Because once the property rights areclearly defined, secure, and enforceable, the property owner have the incentiveto maximize the utility of property, and those properties will go to itshighest value uses, that promotes more efficient resource allocation, which isimportant for economic growth.  

Q2: Why contract freedom is important for economic growth? Give three examples and illustrate your arguments.

  • Becausethe market-based activities is based on contracting. Seller and buyer needcontract to do the transaction. The contract freedom implies the win-winsituation. So, both parties’ utilities are enhanced through contracts. So,since contracting is the basis of market activities, more protection ofcontract will induce more people to engage in transactions, and then the marketwill grow bigger.

Q3: What is agency problem? Illustrate the agency problem in the context of companies.

  • Agency problem is the problem that mayarises from an agency relationships between the agency, which means manager,and the principle, which means the shareholders. The ultimate course of theagency problem is separation of ownership and control in the context ofcompanies. When the owner and manager are not the same person, then we have theagency problems. To be concrete, agency problem arises from informationasymmetry, incomplete contract, conflict of interest, where the agents want thedifferent things from principle.

Q4: In practice, what institutions serve to safeguard contract enforcement in China? Name three types of institutions and justify your opinions.

  • Theinstitutions may come from formal rules like laws and regulations, or frominformal rules like the customs values and practices. Laws and the courts arethe formal mechanism to safeguard contract enforcement. Other informal waysalso could ensure the contract enforcement, such as reputation, repeated gameincentive, social trust, networks etc.

Q5: What content should a Property Law include? Use China’s 2007 Property Law as an example.

  • The legislative intend to clearly defineproperty rights and make promises on property rights credible through law. Itmust initially clarify who owns what. Then it uses different chapters tospecify what are the property rights, such as ownership, perception, securityright.

Class 5 In-Class Discussion Questions:

Q1: Why consumers need special protection? Give three examples and make your own arguments.

  • Becausesimply rely on the freedom of contract, property right is not enough. Intheory, it appeared that the producer and consumers are equal parties in thecontract. In reality, the consumers are facing the imbalances in economicpower, bargaining power. So, there is a high risk of the consumers aredefrauded. That’s why we need consumer laws to balance unequal powers.

Q2: What are the regulation techniques available for consumer protection? Give example(s) of each, do not use existing examples in the PPT.

  • Insummary, law can help consumers in several ways. We can conclude that the firstis the regulation on product to ensure the obligation of the producer andseller with the return policy and the disclosed information which should betold to the consumers, and to make sure the product cannot invade the minimumliabilities and standards. The second is the regulation on contract which mustinclude certain permissions that can protect the consumers. Also, the third isthe regulation on the competitive market through the anti-monopoly law whichcan ensure certain anti-competitive behaviors are prohibited

Q3: What are the market mechanism of consumer protection available? Give example(s) of each, do not use existing examples in the PPT.

  • Because the consumers are weaker party,in order to the market prosperity, even without the regulation, the market willspontaneously develop certain mechanism to reduce the information asymmetrybetween the seller and the buyer.
  • Market mechanism of consumer protection:reputation, third party certification, websites which can help people tocompare different prices, insurance product which use market mechanisms toadjust people’s incentives, intermediaries which help to reduce informationasymmetries between seller and buyer.

Q4: What is the purpose of anti-monopoly law? And how does the anti-monopoly law address its objectives?

  • The anti-monopoly law is the law toprotect monopoly. We could find out that the monopoly is bad for the societybecause it will create the deadweight loss. The producer wants to reduce thecompetition, and the consumer wants more competition, also the social plannerwants more competition. So, the overall objective is to achieve betterallocative efficiency through competition.
  • The anti-monopoly law is divided intoseveral key chapters. The first part is the definition of what is theanti-competitive behavior. The second chapter is to give examples ofanti-competitive behavior. The third chapter provides the exceptions andexemptions. The final part is the setting of the enforcement agency and theirpower and authority like investigate power or impose fine power. To be morespecific, the anti-monopoly law restrict arrangement, regulate the abuse ofmarket dominance, the anti-competitive mergers and acquisitions, and theadministrative monopolistic behaviors.

Q5: What is your opinion on the anti-monopoly law in China? Will it achieve the intended objectives?

  • First, we must acknowledge that this lawis a milestone piece of law in Chinese transition from central planning tomarket economy which using the market as the primary resource allocationmechanism with competition. People can claim the anti-competitive behaviorviolating this law and take actions against those violations.
  • However, on the other hand, this lawmight not be that effective because its legislative intent is somehow againstthe interests of the government. In China, the local government and thestate-owned enterprises are the largest monopolists. Now China is becominginternational, this law could be a tool to protect domestic consumers againstforeign producers.

Class 6 In-Class Discussion Questions:

Q1: Compare two dispute resolution mechanisms: Litigation vs. Arbitration, and argue their respective pros and cons.

Q2:A US friend of you wishes to invest in China and include an arbitration clausein the investment agreement. He asks your opinion whether to choose CIETAC ascenter for arbitration. Advise him. Q3:Critically evaluate on the effect of internet and social media on Chinese legalsystem. Give examples where necessary. Answer by reference to the Provisions of the Supreme People’s Court on the Issuanceof Judgments on the Internet by the People’s Courts (11-21-2013)  最高人民法院关于人民法院在互联网公布裁判文书的规定. Q4:Illustrate the difference between civil case, criminal case and administrativecase in China. What are the particularity in their procedures laws Q5:Comment on the following phenomenon and give ideas how to entice judges to“stay in the system”? The Wall StreetJournal reported that of the over 2,000 judges recruited in Beijing in2008-2012, 17% left their jobs, despite the government efforts to entice themto stay. (WSJ 2015). Since 2007, the total number of judges has barely grown ataround 190,000, whilst the number of cases has swelled by almost 50% in thesame period. Heavy workloads, lowprofessional standards, bad pay, government interference, difficulty inobtaining promotions, loss of pride and status, and growing threat of violencefrom angry petitioners are among the often cited reasons for judges’frustrations.

Class 7 In-Class Discussion Questions:

Q1: What is the advantage of company over sole-proprietorship and partnership?

  • A company allows as many investors aspossible to participating the business. Sole-proprietorship and partnership areprivate in nature.
  • Company has eternal existence. It onlyends when the company deregistered. Sole-proprietorship and partnership endswhen sole-proprietor and partner ends.
  • Company is separated legal entity, itallows the shareholders and officers to be sheltered from the company debt andliability. The sole-proprietors and partners’ personal liability will connectthe sole-proprietorship and partnership liabilities.

Q2: What is the objective of company law? And what content should a typical company law code include?

  • In the law economics point of view,company is a nexus of contracts. The objective of company law is first to helpenforce contracts, to clarify the property rights among shareholders,directors, and officers. The second objective of company is to protectshareholders’ interests from the information asymmetry or moral hazard tomanagers.
  • A typical company law covers the wholeprocess from the companies’ incorporation to company organs includeshareholders meeting, board of directors, board of supervisors. It alsoincludes the rights and obligations of different parties of the contract. Italso concerns of fund raising of the company.

Q3: Why minority shareholders of the company need special protection? Give examples on the safeguards of minority shareholders in company or securities law.

  • Because we know that shareholders ingeneral suffer from information asymmetry and moral hazard problem. Theseparation of ownership and control problem in the context of minorityshareholders is particularly severe.
  • There are certain rights of minority shareholdersthat must be protected, such as participating in company’s affairs throughvoting, acquiring dividend from the company, taking legal actions on behalf ofthe company, exiting the company in certain situations.

Q4: What is the purpose of enterprise bankruptcy law? What content should a typical enterprise bankruptcy law include?

  • The first purpose of enterprisebankruptcy law is to provide the rules on the ordering market exit of thecompany. The second purpose is to protect creditors’ interests by stipulatingtheir rights over the company’s property.
  • A typical enterprise bankruptcy lawshould include who can apply for bankruptcy, what are the procedures ofbankruptcy, what is the rights and responsibilities of the administrator, whatare the process for compromising reorganization procedure, and what are therules of orders of distribution.  

Q5: What is the purpose of personal bankruptcy law? What content should a typical personal bankruptcy law include? What are the challenges for China to have a personal bankruptcy code?

  • Thepurpose of personal bankruptcy law is first to protect creditors’ interestswhen an individual cannot pay debts when it comes to due. The personalbankruptcy law also contains provisions on how the individual’s asset should beascertained, what are the orders of distribution of individual’s personalasset. The second objective that to give the honest but unfortunate debtors anew opportunity in life is equally important
  • Contents:who is eligible to apply bankruptcy, what are the rights and responsibilitiesof administrators, what are the rules during the bankruptcy period, and how aperson can totally discharge after the end of bankruptcy period.
  • CurrentlyChina doesn’t have personal bankruptcy law. In infrastructure sight, China nowdoesn’t have well-developed personal credit system. Without this, it is hard toascertain a person’s total asset and total liabilities. China has a weakoverall creditor’s legal protection environment, it is hard to find the levelof protection to help creditors to ascertain, discover and then enforce theasset. Also, there is a cultural reason that historically the Chinese culturewas less acceptable for the tolerance of failure and giving people a freshstart. Finally, we worry about the abuse of the personal bankruptcy willtransfer the debt to the financial institutions that cannot afford.

Class 8 In-Class Discussion Questions:

Q1: Explain to the class the following concepts under the WTO framework: (1) Most Favored Nation Treatment; (2) National Treatment; (3) Non-tariff Barriers; (3) Anti-dumping and Subsidies; and the consequence / remedies for violations.

  • These are principles under the WTO, theobjective of the WTO is to lower the tariffs, and to make easier marketingaccess of investing foreign countries. So, the MFN is basically treating everyother member countries alike. NT is a post entry requirement, it requirestreating foreign and domestic investors equally through protecting propertyrights and engagement of the market, preventing local protectionism. NTB meansnon-tariffs to any barriers of trade and investment. AD means the countriesshould prevent the investors sell their product in countries with lower pricesthan their product cost. The subsidies is a form of government specificfinancial assistants on exporters, and making those exporters at an unfair costadvantage to importing country producers. When there are anti-dumping andsubsidies happens, the importing country can apply to the WTO for a disputesettlement.

Q2: What are the impacts of China’s accession to the WTO on the country’s opening up and economic reforms?

  • It is a big push to its domestic marketsupporting institutions. Joining the WTO means China should take the wholenegotiation package. Meanwhile, China also have to compromise some requirementin WTO. It is a win-win situation to reduce the barriers to international tradeand investment. It opens the Chinese market to foreign traders and investors.It enables the opportunity in China to enter into the foreign market. It alsohelps the improvement of the internationalization process.
  • On the other hand, because China opensits market formally, then it translated to the neat of developing the marketsupporting regulation institutions.

Q3: Introduce to the class the rationale behind CEPA, and in which ways CEPA can benefit Hong Kong. Give examples to support your arguments.

  • CEPA is a free trade agreement, allowedunder the WTO framework. It is a regional free trade agreement. It enablesthose countries to enter into regional trade agreement which offer the morepreferential treatment to each other.
  • It allows zero tariff rate in a majorityof the goods between Hong Kong and China. Also, CEPA offers easier access ofinvestors to each other markets. However, the benefits of CEPA to China andHong Kong are not equal because China is a large economy and Hong Kong is a smallmarket and free-trade pot. It enables to help Hong Kong accessing into Chinesemarket with zero tariff and easier entry access. Also, CEPA influences most onHong Kong service industry which are the biggest component of Hong Kongeconomy. So, foreign investors can set Hong Kong as the headquarters to investin China to enjoy easy market access.

Q4: What are the legal issues involved if a foreign company wants to acquire an industry leader in China. Make necessary assumptions wherever possible.

  • Foreign direct investment. The relevantlaws on foreign investment will follow. First, we should know to what extentChina allows foreign investment in this industry. Also, foreign investorsshould look at China’s WTO commitment on market access.
  • Secondly, foreign investors should lookat the nature of the target company. If it is a state-owned company, then thegovernment approval is required. If it is the private or listed company, thenthey need additional rules to protect minority shareholders.
  • Thirdly, foreign investors need considerthe acquisition method they will use. Different acquisition methods requiredifferent implications such as tax.
  • Meanwhile, the foreign investors shouldalso consider the anti-monopoly laws, because if such acquisition causeanti-competitive effect on Chinese consumers, then the access approval might beabolished.

Q5: Conduct a SWOT analysis on Hong Kong’s role in China’s internationalization process. 

  • We all know that Hong Kong has beenhistorically called ‘a gate way’ between China and west.
  • Strength: geography, the high levels ofhuman capital, the infrastructure, the rule of law, the ease to do business.
  • Weakness: the political conflict, thelarge gap between the rich and the poor, the lack of social cohesion ondevelopment, the transformation from a service industry innovation basedindustry is not so successful.
  • Opportunity: Hong Kong can play the gate wayrole as Chinese companies going abroad about investing and trading with theworld better. China could use Hong Kong as the way to raise capital, investmentplatforms, marketing place, and to closer their regional immigration.
  • Threats: strategic role of mainlandcities, China’s open up makes Hong Kong’s institutional advantage weakens, themarginalized role of Hong Kong’s key industry, such as the financial industrywhich have more competitors which are regional financial centers, the tourismindustry, the trading and logistics.

Class 9 In-Class Discussion Questions:

Q1: Compare state owned enterprises and private owned enterprises in China in multiple aspects.

  • Multiple aspects: operational efficiency,financing, corporate governance, tax behaviors, investment behaviors,internationalization, personnel decisions.
  • It has to trace for their objectivefunctions and utilities. Private owned enterprises are value maximizing firms.The purpose of those is to maximize shareholders’ value. However, for state-ownedenterprises, there are other objectives, such as the social objectives andpolitical objectives.

Q2: In what way does the so-called “Fintech” wave impose threats to the conventional banking industry? Give example to support your arguments.

  • Firstly, we should know what is theweakness of conventional banking industry. Banks are financial intermediarieswho earn their profit from the spread between the deposit interest rate and thelending interest rate. Also, banks should set proper risk control to overcomethe information problem and moral hazard problem. In fact, banks are not doingthat control well because they may be lack of information, monitoring, andscientific evaluation. They could be bureaucracy, following orders.
  • Fintech is basically combination offinance and technology. It uses technology to help financial industry.Technology requires big data, faster and costless dissemination of information,the algorithm.
  • Fintech impose threats to theconventional banking industry by broadening the sources of information throughthe big data, improving the scientific evaluation through the algorithm and thefraud detection. Moreover, the fintech is based on scientific calculation andfrees the banks from biased human decision making. It can make quicker decisionto reduce bureaucracy.

Q3: What is “Shadow Banking”? Will there be a major shadow banking crisis in China?

  • Shadow banking, which is similar tobanking, formed by financial firms. It has similar financial intermediary rolelike banks but not subject to the same level of banking regulations. There area lot of different forms of shadow banking.
  • Shadow banking has its positive influencein promoting economic activities and they fill the financing gap left by theformal banking. They accept those enterprises who are denied by the formalbanking system and help them to get the needed capital.
  • Shadow banking is not subject to thebanking regulation, in practice alternative institutions such as reputation,trust, third party referral safeguard them. Shadow banking is truly worked inChina but recent fraud events happened in trust company, P2P, and the wealthmanagement products reveal that they actually need regulations.
  • Some factors may be caused the majorcrisis in China, the first point is how large is the shadow banking problem inChina. Secondly, to what extent the formal sector can control the risk of theshadow banking crisis.

Q4: Critically evaluate the purpose, design, and legal issues involved in the reform of non-tradable shares (股权分置改革) in China since 2005. What impact does it have on Chinese stock market?

  • The non-tradable shares reform is aclassical example of property rights coupled with freedom of contract becausethe non-tradable shares are state-owned shares. They don’t have freedom ofcontract with others to reach the benefit of the value appreciation. They weresubstantially undervalued. The state owners don’t have much incentive to workhard because they cannot get benefit from the share value appreciation. Thenon-tradable shares reform gives the incentives of the state owners to maximizethe value of its property.
  • It needs a process which may help thereform becoming acceptable. The converting plan must be approved by minorityshareholders through contracting. So, the basic procedure of each company isproposed the plan, then negotiation, finally plan approved by the CSRC.
  • We can not only give property rights butalso freedom of contract to review the full value of that property.

Q5: Comment on the following statement: “After 25 years of development, China’s stock market is still no better than a casino”. Answer by reference to the legal / institutional development of securities regulations in China over the past 25 years.

  • Chinese stock market is unpredictablethat the stock index doesn’t correspond to the basic economic conditions upsand downs. For each firms’ stock price, doesn’t correspond to the firmfundamental. The firm investment doesn’t follow the firm value.
  • We can talk about the market regulationon the entry and exit, the growth of institutionally investors who can serve asmonitors and inform traders, the strengthening of minority shareholders rightsin a securities market, the increased disclosure requirement because ultimatelytransparency that makes the market more incredible, the integration of China’saccounting standard with the global international IFRS financial standards, themonitoring role of the regulators.

Class 10 In-Class Discussion Questions:

Q1: Explain the economic rationale and legal methods for copyright protection.

  • For the economic rationale, it could bementioned that the copyright law is to strike the right balance between on theone hand, the society’s demand for more public goods, on the other hand, thecopyright owner’s incentive to create new work without the fear of beingundersold.
  • For legal methods, it is to protect theintellectual property by granting the copyright owner an exclusive right toexploit his work for a prescribe term. After the term ends, this copyright willbe public that anybody can print. It is also should be mentioned that certainsubstantive requirement under Chinese copyright law constructed in 2010, suchas no registration for copyright is needed, the distinction between moralrights which in definite term are nontransferable and economic rights which aretransferable, what constitute fair use, and finally what are the remedies forcopyright infringement.

Q2: Explain the economic rationale and legal methods for patent protection.

  • For the economic rationale, it could bementioned that the patent law is to strike the right balance between thesociety’s demand for new discoveries and the inventor’s incentive to recouptheir investment in developing this patent.
  • For legal methods, it is to protect thepatent by giving inventors an exclusive property right through law formmonopoly to exploit his patent for a prescribe period, after that, this patentbecome public goods. Following China patent law in 2008, every patent needapplication, and each application requires approval, especially inventions.Also, there are approval distinctions between invention, utility model, andexterior design. For the remedies, there are ways of civil, criminal, andadministrative.

Q3: Explain the economic rationale and legal methods for trade mark protection.

  • Protect the trademark owner privateinterests with goodwill or reputation. The trademark owner devote substantiveresources in order to build this reputation, if other people can freely counterfeitthem, the product will be undersold.
  • People who apply the trademark haveexclusive right to use it that is indefinite terms as long as paying therenewal fee. Firstly, register the trademark, after it is approved, usingidentical trademark on other products, selling good counterfeiting, alteringthe trademark will be forbidden. Also about the well-known trademark, it enjoysthe cross-category protection. There are civil, criminal, and administrativeremedies.

Q4: What is your view on the “Shanzhai” culture in China? How do you analyze the relationship between shanzhai, innovation, and entrepreneurship? Cite examples to support your arguments if necessary.

  • Firstly, people may take “Shanzhai” as aninformal industry, known as the fast product cycle, lower quality but fitfuluse. And they always see inspirations from successful products. The “Shanzhai”product may or may not infringe on other people’s IP rights because not every“Shanzhai” products is infringing on other people’s patent or copyright.
  • First, “Shanzhai” could be a source ofinnovation. Some of the “Shanzhai” products have their own newness. Secondly,“Shanzhai” products can be welfare enhancing for the society because it fillsthe deadweight loss which is inevitable. “Shanzhai” products can promote otherpeople to innovate. As for “Shanzhai” products and entrepreneurship, both ofthem share some commonalities because entrepreneurship is about being entrepreneurialin serving the market demands, “Shanzhai” products is actually acute capturingmarket demands.
  • To identifying whether “Shanzhai”products is right or wrong, we should know some kind of ethical issues, such asutilitarianism analysis, or the right theory.

Q5: Comment on the following comments made by Lu Xun, China’s most prominent writer in the twentieth century, ‘Foreigners use the compass for navigation whilst the Chinese use it to for fung shui; foreigners use gunpowder to make armed weapons whilst the Chinese use it for fireworks; foreigners use opium for medical treatment whilst the Chinese take it as food’ “外国用火药制造子弹御敌,中国却用它做爆竹敬神;外国用罗盘针航海,中国却用它看风水;外国用鸦片治病,中国却拿来当饭吃。鲁迅 《电的利弊》,申报:自由谈,16/02/1933

  • The key idea is he wanted to say that theinnovation system in country can be under political control. Politician allowedinnovation development to serve their political purpose.
  • This words indicated that at that time,the minority political power was afraid of the Han people because the Han peopleused to be the majority, letting the Han people to develop technology can be athreat to the dominance.

Final exam:

6 questions, choose 4 to answer. All from the in-class questions. We should know what are the important contents. Read back the introductory handout and syllabus.

Whole structure:

Legal system and the economic law in China.

New institutional economics. –insights, studying what types of institutions are conducive to economic growth. What is the role of the law?

Three things we should remember in order to develop market economy: property rights, contracts, anti-fraud. Property rights is important because people’s incentive is maximized. The contract law is important because every economic transaction and exchange is achieved through contracting. The anti-fraud is important because in market people are in highly information asymmetry situation. So, the parties with information advantage should disclosure more.

The law can protect property right, contracts, prevent fraud, making sure the punishment of fraud. The court is important because it offers a forum to enforce the law and settle disputes. The court must be independent, correlated with the civil law and common law.

China’s legal reform, opening up, started after China attended the WTO, forced China to develop its legal system.

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