Criminal law pays: penal law's contribution to China's economic development.

AuthorLewis, Margaret K.
PositionAbstract through III. The Historical View B. Property Stability, p. 371-408

China's rapid rise to become the second largest economy in the world is nothing short of extraordinary. When economic reforms took off in the late 1970s, China had been without formal criminal law for three decades. China's economic development since the launch of the reform period has occurred directly alongside the development of its criminal law, but the academic literature has failed to ask what role criminal law plays in China's impressive growth.

This Article argues that not only has the People's Republic of China leadership historically used criminal law in service of economic ends but also, going forward, criminal law will likely play a multifaceted role in the leadership's strategy to sustain growth. This inquiry is particularly timely on the heels of a once-a-decade leadership transition and as China's ability to maintain a robust growth rate is facing rising skepticism.

Looking beyond China, the law and development literature more generally has also failed to seriously discuss criminal law. At a time when many are rethinking the role of law in economic development, it is worth broadening the discussion to include criminal law. China is an instructive test case to begin that conversation.

Table of Contents I. Introduction II. Criminal Law, China, and the Law and Development Debate A. Criminal Law and the Law and Development Literature B. China and the Law and Development Literature C. Literature on China's Economic Growth and Crime III. The Historical View A. Basic Stability B. Property Stability C. Market Stability IV. The Prospective View A. Activities Detrimental to the Socialist Market Economy 1. Financial Crimes 2. Tainted Consumer-Product Crimes 3. Intellectual Property Crimes 4. Environmental Crimes 5. Employment-Related Crimes 6. Summary: Supporting the Socialist Market Economy B. Limited Exposing of Financial Misdeeds by Officials C. Targeting Potentially Destabilizing Elements V. Conclusion I. INTRODUCTION

"Our country must develop; if we do not develop then we will be bullied. Development is the only hard truth." (1)--Deng Xiaoping, 1992

"We must have a profound understanding of the development trend and requirements of our country's social productive forces, focus on economic development and formulate and implement a correct line ...," (2)--Jiang Zemin, 2001

"Development is critically important, and upholding stability is also a critically important task." (3)--Hu Jintao, 2011

'We must follow the strategic thinking that development is of overriding importance." (4)--Xi Jinping, 2013

As these statements from the highest ranking members of the past four generations of leaders indicate, (5) development has been a paramount goal of the leadership of the People's Republic of China (PRC or China). Viewing development from the perspective of macroeconomic growth, China's development over the past three decades has been extraordinary. In the late 1970s, China was emerging from the chaos of the Cultural Revolution and the resulting shambles of its national economy. (6) By April 2010, China had surpassed Japan to become the world's second largest economy in terms of nominal gross domestic product (GDP). (7) In 2013, the World Bank reported, "By any standard, China's economic performance over the last three decades has been impressive. GDP growth averaged 10 percent a year, and over 500 million people were lifted out of poverty." (8) China's rosy story of uninterrupted growth masks concerns that its economy is slowing. (9) This uncertain moment in China's growth trajectory is an opportune time to reflect on the forces behind China's stunning economic rise. In particular, this Article considers China's rapid development and asks what role criminal law has played to date and will play in the future. This Article then goes a step further, asking why the law and development literature has failed to seriously ask this question both with respect to China and more generally.

Law and development literature, though extensive, generally overlooks the role of criminal law. At base, law and development scholars question how governments use law to create order in society and bolster the government's legitimacy. A common thread in the literature is how this foundation can in turn promote economic growth. (10) The debate has focused on the Washington Consensus's support for a market economy's need for clear and enforceable contract and property rights, often referred to as the "rights hypothesis": (11) "[T]he thesis is that property rights determine who has control over assets; contract law enables market participants to exchange those assets in complicated transactions; and the courts enable market actors to plan by resolving disputes predictably, efficiently, and in accordance with the legal rules." (12) China has repeatedly been singled out as posing a particular challenge to the rights hypothesis because of its astounding growth despite what is widely regarded as a weak legal system. (13) Academics have countered this position by exploring the role of informal institutions and questioning the significance of property rights in China's development. (14) Yet throughout these debates, the role of criminal law has been almost totally ignored. This is a mistake, and, at a time when many are rethinking the role of law in economic development, it is worth broadening the discussion to include criminal law.

The law and development literature's focus on empowering private actors by creating a neutral bureaucracy subject to objective judicial review has shifted the debate away from the most basic function of law: creating order. And creating order starts with the coercive power of the state exercised through criminal law. Not only is criminal law a direct way for the government to deprive people of money, liberty, and life, it is likely cheaper and faster to build than the civil and administrative law systems on which the rights hypothesis relies. (15) If a country's civil and administrative law systems are not credible enough to deter activities that are detrimental to economic growth, the government can invoke the heavy hand of criminal law. Furthermore, the politically neutral judiciary envisioned by the rights hypothesis may not be desirable to an authoritarian government. (16)

To the extent that the conversation is purely about the healthy functioning of a market-driven economy and an overriding concern about protecting property rights against the state, it is understandable that criminal law is pushed to the side. In a market economy, the state largely sets ground rules and then steps back and allows individuals to function with little intervention. (17) But criminal law is not the province of private actors; the state is an indispensable party. (18) Overlooking criminal law because it operates outside of the market structure creates a blind spot to how this critical area of law intersects with economic growth. This is not to say that a strong system of contract (19) and property rights that is enforceable through the civil and administrative court systems is unimportant. The choice between civil and administrative law on the one hand and criminal law on the other is not either-or. When the legal system for resolving disputes between private parties is weak, criminal law can act as an alternative mechanism, albeit incomplete and imperfect, to foster development. As argued herein, that is certainly the case with China. (20)

China is an instructive test case for broadening the law and development debate to include criminal law for three reasons. First, law in China has generally been understood to foster development, not to constrain the state. (21) Most literature on China, however, discusses this development-enhancing view of law in the context of civil and commercial law. (22) Other than passing references to the need for stability after the chaos of the Cultural Revolution, scholars have not linked criminal law to broader questions of law and development. (23) Second, when economic reforms took off in the late 1970s, China had been without formal criminal law for three decades. (24) China's economic development has occurred directly alongside the development of its criminal law. Third, China has long been viewed as a test case for the rights hypothesis. (25) Once the discourse is broadened to consider criminal law, previously overlooked ways in which law interacts with development become apparent.

As an initial clarification, this Article uses an expansive view of "criminal law" to include both blackletter laws and deviations from the formal criminal justice system that are nonetheless important ways in which the state exercises its coercive power--for example, Chinese Communist Party (CCP or Party) disciplinary procedures, administrative detention, and extralegal measures. (26) Since the late 1970s, constructing a legal system has been a priority for the PRC government. (27) Changes to blackletter criminal laws over the past three decades, which occurred in tandem with development of laws more overtly geared toward creating a legal framework for market activity, reflect the leadership's desire to put criminal laws on the books that serve economic ends. (28) While proposing this top-down, instrumentalist (29) story of the role of blackletter laws in China's stellar economic growth, it is also important to recognize exercises of state power that diverge from the formal criminal justice system. The strength of China's political apparatus comes to the fore when the leadership sees a threat to Party rule that requires immediate and severe intervention, as most dramatically seen in the violent response to the 1989 protests in Tiananmen Square. (30) Following the initial crackdown, the leadership turned to criminal law to punish protestors--both as counterrevolutionaries and common criminals--while concurrently using "administrative" sanctions to silence others. (31) This is but one example of how...

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