Market economy is a law-based economy full of competition. All the regulations on the structure and behaviors of market entities, trading activities and order, labor and social security closely related to the market, therefore, aim at serving market activities. In the course of constructing a market economy, China has continuously replenished and improved the market-oriented legal system, thus making substantial preparations for the cultivation and development of market economy, and providing an effective and full guaranty for the protection of public and private property rights as well as for the establishment of a fair competition order in the market.

Ⅰ. Building China's Market-Oriented Legal System

After expressly declaring to adopt a socialist market economy in 1992, China remarkably speeded up her pace in lawmaking for market economy. Particularly, with the well-devised lawmaking activities for market economy by the 8th and 9th National People's Congress, a series of market-oriented laws were successfully promulgated, and consequently a preliminary legal system accommodating to the market economy came into being.

(Ⅰ) Amendments to the Constitution

The prevailing Constitution of the People's Republic of China (the Constitution) was enacted on December 4, 1982. Being the fundamental law of the State, and the base for setting up a market-oriented legal system, the Constitution firstly took positive actions against the practices of the reforms of economic system, which can be manifested by the three consecutive revisions respectively in 1988, 1993 and 1999. The 1988 Amendments to the Constitution stipulates, "the private sector of the economy is allowed to exist and be developed within the specified range by law. The private sector is a complement to the socialist public economy. The State shall protect the legal rights and interests of , and guide, supervise and manage the private sector", and, "the land use right can be transferred according to law". It was explicitly written in the 1993 Amendments, "the State will carry out the socialist market economy", and, "the State shall consolidate legislation on economy", and additionally the state-run economy was amended to the state-owned economy. In 1999, it was written into the Amendments the legislation target of "governing the state by law and constructing a socialist legal state". These Amendments acclimatized the relevant regulations and stipulations to the actual conditions, provided powerful legal support to the overall development and progress of the society, and made the Constitution better play its role as a fundamental law.

(Ⅱ) Legislation on Market Entities

Market entities refer to enterprises in most cases. Enterprise legislation constitutes the overwhelming part of the legislation for market entities. For over 50 years, China had divided enterprises by ownership systems, namely, owned by the whole people, collectively-owned, private or individual. In case of industrial and commercial registration, it is required to register the ownership system first. Such criterion is not very scientific and rational. For instance, it is very hard to distinguish between the private enterprises from individual ones. On the other hand, enterprises with different ownership systems are not treated equally, which can be seen from the entitlements and liabilities of the enterprises owned by the whole people, collectively-owned, private and individual enterprises. Obviously, such division cannot meet the requirements of market economy. For this purpose, respectively in 1993, 1997 and 1999, China promulgated three laws, namely, file Company Law of the People's Republic of China ( the Company Law, amended in 1999), the Law on Partnership Enterprises, and the Law on Individual Proprietorship Enterprises. These laws took the structure of contributions and the investors' responsibilities as the criterion rather than the ownership system to divide market entities - enterprises. As a result, the legislation for market entities had been enriched, and the former criterion of ownership system for dividing enterprises died out.

The Company Law lays a foundation in legislation for the reforms in state-owned enterprises, and stipulates the qualifications of limited companies and incorporations, the organizational structure, issuance and transfer of company shares and debentures, winding-up and liquidation, branches of overseas companies, liabilities for violating the Company Law, etc. By means of adjusting the internal and external relations of companies, and protecting the legal rights and interests of the companies, shareholders and creditors, the Company Law brings itself into line with the requirements of market economy, and the international market, thus reducing the abusive incorporation of companies and providing legal basis for the transformation of operational mechanism in the state-owned enterprises. The promulgation and implementation of the Company Law 1993 is of great significance in the following aspects: First, it separated the properties of the shareholders from those of the company itself. It is stipulated in Article IV therein that all shareholders of a company shall receive the distributed assets yields for the owners, and enjoy the right to participate in decision-making for material issues, select the management bodies, and other aspects, in proportion to the assets contributed to the company as investors. The company concerned shall possess any and all the corporate property rights invested by the shareholders. That means after investment all shareholders including the state-owned investors only enjoy the right that a shareholder shall have while the company concerned shall enjoy all corporate property rights including the ownership of the properties invested by the contributors. Therefore, the company concerned is entitled to possess, use, receive earnings therefrom, and dispose of the properties under its possession according to law, which divorces corporate properties from shareholders' properties. Second, entitled the shareholders to take limited liabilities. According to the stipulations in the Article 3 therein, all shareholders of any limited company shall take liabilities for the company under the limit of their contributions; in respect of incorporation, all capital shall be divided into shares of equal amount and the shareholders shall bear liabilities under the limit of their shares. Third, the companies were granted with independent personality. It is stipulated in the Article 3 therein that any limited company or incorporation shall be a business corporation. Additionally, the Article 5 stipulates that any company shall operate independently with all its corporate properties and assume sole responsibility for its own profits and losses according to law. In other words, all companies have ability of civil rights and that of disposition, and are entitled to enjoy rights and undertake obligations in its capacity and civil liabilities independently.

Partnership, as a type of enterprise, is a profit-making organization for which all the partners sign a partnership agreement, whereby they make contributions, run the business, distribute earnings and take risks jointly, and take limitless joint and several liability for the debts of such partnership. Although it is an enterprise held by more than one investor, a partnership differs from company in that all the contributors (partners) are jointly mad severally liable for the debts without limit. In case of debts, a partnership shall make repayment with all its properties. In the event that its properties are not sufficient enough to pay off all due debts, all partners shall take limitless joint and several liability thereof. The Law on Partnership Enterprises specifies the establishment of a partnership, investment of partnership properties, implementation of partnership affairs, entering into and withdrawal from the partnership, winding-up and liquidation, legal liabilities, etc. It aims at coordinating the relations in partnership, protecting the creditors' interests and promoting the development of partnerships. In China today, a considerable percentage of the private enterprises are partnerships. Even for a jointly-operated enterprise, some organizations involved are partnerships. Since the General Principles of the Civil Law only presents some guidelines for partnerships, which cannot meet the demand for the development of partnerships, the Law on Partnership Enterprises will play an active role in protecting the development of various economic sectors.

An individual proprietorship enterprise is an economic entity established by a natural person within the territory of China pursuant to the Law of the People' s Republic of China on Individual Proprietorship Enterprise, under which the investor himself/herself shall possess all the properties and take limitless liability for the debts within its personal properties. An individual proprietorship enterprise complies with the doctrine of standardization (criterionism) for establishment, which means its establishment shall not be subject to any approval. This kind of enterprises have two major features: one is the more freedom in controlling the enterprise by the contributor; the contributor of an individual proprietary enterprise has the right to transfer, inherit or assign the rights related to the properties of such enterprise according to law as property owner, and either operate the business by himself/herself or entrust or employ another person with civil capacity to manage the business; second, the contributor to an individual proprietorship enterprise takes limitless liability for the debts of the enterprise under the limit of his/her contributions according to law, or the family property if such person makes investment with family property.

The promulgation and implementation of the above three laws indicates that China is now changing the criterion for judging an enterprise from by its ownership system to by capital structure and investors' responsibilities, and that China is constructing an architecture of market entities suitable to and as required by the socialist market economy. The former state-owned enterprises will finally he transformed into limited companies or incorporations pursuant to the stipulations in the Company Law. Therefore, in terms of enterprise structure, a system will be constructed with corporate enterprises as the principal part to be supplemented by partnerships and individual proprietorships. Only in this way can true equality be realized between market entities, to ensure the security in transactions and the order of fair competition, and to satisfy the requirements for the operation of market economy.

(Ⅲ) Legislation on Regulating the Behaviors of Market Entities

Such laws that have been enacted in China include the Contract Law, the Law on Negotiable Instruments, the htsurartce Law, the Securities Law and the Guaranty Law.

The new Contract Law that took effect as of October 1, 1999, have great importance for regulating the activities in market economy as it: (1) Unifies all the laws on contracts; (2) Makes detailed stipulations on the conclusion of contracts; (3) Acknowledges that any economic contract which is concluded by a business corporation beyond its authorization still has binding force to such corporation; (4) Adopts the doctrine of undisclosed principal in the Anglo American law system; (5) Establishes the defending system for contract performance and protective system for debts to protect the security of trading; (6) Perfects the default liabilities system; (7) Initiates a structure with general principles and detailed provisions separated for all other laws on contracts, thus enhancing their applicability and practicability; (8)Uses abundant reference articles to simplify the legislation technology and to facilitate the operation; and (9)Explicitly stipulates how to interpret contracts.

The Guaranty Law was passed on June 30, 1995. It is a standard law for regulating the behaviors of the creditors to make ensure the realization of their credit by means of granting guaranty in some economic activities, such as financing, sales, goods transportation, processing and undertaking. In reference to the legislation experience of the continental law system, the Guaranty Law recognizes five means of guaranty: warranty, mortgage, pledge (including pledge of chattel and pledge of a right), lien and earnest money, which are adapted to the economic development and the requirements in financing.

The Law on Negotiable Instruments was passed on May 10, 1995. It is a legal norm for coordinating and regulating all social relations arising from the negotiable instruments between citizens and legal persons. There are three negotiable instruments: bill of exchange, promissory note and check. This law specifies the rights and obligations attached to the negotiable instruments, and features compulsoriness, technicality and international applicability. Since negotiable instruments play an extremely important role in payment, credit, settlement and financing, the Law on Negotiable Instruments is one of the important laws to support and cultivate the market economy. This law, which is enacted in accordance with two international treaties on negotiable instruments and with reference to some practices from other countries, provides flexible and safe payment instruments and guaranty for the increasingly developing commodity trading.

The Insurance Law was promulgated on June 30, 1995, and was amended in October 2002. It is to coordinate mad regulate all social relations arising from insuring activities between citizens and legal persons. As insurance is an indispensable part in the national economy, the Insurance Law takes an active part in preventing from disasters, soliciting compensation for the damaged, protecting social production and stabilizing our daily life. By virtue of the stipulations on the general principles of insurance, insurance contracts, property insurance, life insurance, establishment and management of an insurance enterprise, this law gathers together the power of enterprises and individuals to create a spirit of helping each other, and improves the insurance systems on transaction risks, life risks and accidents to enable the enterprises and individuals to obtain rational and reliable social security against possible risks.

The Securities Law was enacted on December 29, 1998. It is a legal norm for coordinating and regulating all social relations arising from the issuance, trading and management of securities. With an eye to establishing and developing a unified securities market, creating an open, impartial mad equitable environment for the issuance and trading of securities, protecting the legal rights and interests of the investors, and maintaining the socialist economic order mad public interests, the Securities Law stipulates the issuance and trading of securities, information disclosure, prohibition of insider trading, acquisition of listed company, and other provisions on securities exchanges, securities companies, traders, securities associations, and administration. Up to now, stocks and debentures are available for trading, mad two stock exchanges have been set up in China. The securities market is flourishing. As securities transactions, and stock transactions in particular, may involve the interests of mass investors, and concern the stability of social economy, a perfect securities law system is required ; what's more important, strict governance and administration under such law may keep away malignant speculation and crack down on insider trading, and thus maintain the healthy growth of the securities market.

(Ⅳ) Legislation on the Administration of Market Order

In the legislation on the administration of market order, China has successively promulgated the Standardization Law, the Law of Counter-Unfair Competition, tile Law on the Protection of Consumer Rights & Interests, the Law on Product Quality, the Advertisement Law, the Law on Food Hygiene, the Law on Pharmaceutical Administration, the Auction Law, etc., respectively touching the fields of fair competition in the market, supervision and management of product quality, protection of consumers' rights and interests, advertising behaviors, auction rules, etc. Particularly, the Law on the Protection of Consumer Rights & Interests and the Law of Counter-Unfair Competition had provided necessary and timely legal support for the building of a socialist market economy order. The Law on the Protection of Consumer Rights & Interests may indemnify the mass consumers from infringement of rights and interests by specifying the consumers' rights and interests, remedies for the infringed consumers, obligations of the producers and operators in protecting the legal rights and interests of the consumers. The Law of Counter-Unfair Competition defines some unfair competition acts like counterfeit, purchase quota for squeezing out rivals, commercial bribes, false commercials, disclosure or encroachment of commercial secrets, price cutting for squeezing out rivals, tie-in sale, illicit planned purchase with incentives, defaming of commercial credit, collusion in competitive bidding, etc. , and specifies the punishments for the above illicit competition acts that the operators have conducted during their operational activities which have infringed or may infringe another person' s legal rights and interests, in violation of the good faith doctrine and other recognized professional ethics. The implementation of the Law of Counter-Unfair Competition protects the legal production and operation under fair competition and consumers' legal rights and interests, and maintains the healthy development of socialist market economy. The Law on Product Quality protects the rights and interests of the product users and maintains the normal order in the market economy by specifying the compulsory obligations of the producers and sellers on product quality.

To regulate acts and maintain normal order in the financial market, China has promulgated the Law on the People " s Bank of China, the Law of Commercial Banks, the Regulations on Foreign Banking Facilities Control, the Regulations on the Administration of Foreign Insurance Companies, the Regulations on Dissolving Financial Institutions, etc. These laws and regulations have great practical or immediate significance for making clear the financial relations, consummating the financial system, abolishing the tradition settlement modes, and achieving the goal of making payment by negotiable instruments.

The Customs Law, the Law on Inspection of import and Export Commodities, and other laws were promulgated to rectify the administration concerning foreign interests; meanwhile, the State Council published some auxiliary economic laws and regulations concerning foreign interests.

In protection of intellectual property fights, various laws arid rides were enacted or amended, including, but not limited to, the Trademark Law, the Copyright Law, the Patent Law, the Regulations on the Customs Protection of Intellectual Property Rights, the Regulations on the Protection of Computer Software, the Rules on the Implementation of International Copyright Convention, and the Regulations on the Protection of New Species and Varieties of Plants. In addition, it has been expressly stipulated in the Law of Counter-Unfair Competition promulgated in September 1993 that commercial secrets should be protected; the 1997 Amendments to the Criminal Law has set aside a separate chapter to specify the criminal sanctions on serious infringement of trademark or copyright, disclosure of or encroachment upon commercial secrets, and counterfeit of another person s patents. These laws and regulations indicate that China has constructed a comparatively complete legal system on the protection of intellectual property rights.

As regards resources and environmental protection, China published and put into practice the Mineral Resources Law, the Law of Coals, the Forestry Law, the Law on Grasslands, the Fisheries Law, the Law on Electric Power, the Environmental Protection Law, the Law on the Prevention arid Control of Atmospheric Pollution, the Law on the Prevention and Control of Sound Pollution, the Law on the Prevention & Control of Environmental Pollution by Solid Waste, the Law on Maritime Environment Protection, the Law on the Prevention and Control of Water Pollution, etc. Meanwhile, the State Council and the environmental protection authorities issued some auxiliary administrative rules and regulations. The environmental protection legislation is thus relatively complete.

As for regulating the legal administration in the administrative organizations, China has made great progress in legislation of administrative procedure. In 1996, the Law on Administrative Penalty was resolved, defining the principle of limiting the punishing authority and establishing punishment organizations according to law, the principle of impartiality and openness of punishments, the principle of protecting legal rights, and the principle that no one should be punished twice for the same cause; additionally, it makes detailed stipulations on the hearing procedure. The law on State Compensation, the Administrative Procedure Law, mad the Law on Administrative Reconsideration laid some restrictions on the illegal administration acts by the administrative organizations, and stipulated that all administrative counterparts should be granted remedies in legal procedure and in substance for the damages they suffer.

(Ⅴ) Legislation on Macroeconomic Control

In respect of the macroeconomic control, in order to establish a complete regulatory system and transform the governmental functions, China promulgated the Budget Law, the Audit Law, the Accounting Law, the Foreign Trade Law, the Law on Administration of Tax Collection, the Individual Income Tax Law, and the Price Law. The Budget Law stipulates the drafting, deliberation, resolution mad implementation of the budget, for the sake of standardizing the procedures for these activities, strengthening the supervision over the implementation of the proposals of budget and final accounts and maintaining the budgeted revenue and expenditure in balance. China successfully conducted the reforms of taxation system in early 1990s, involving 38 tax categories of different aspects and sizes such as the former turnover taxation system, the income taxation system, resources mad property taxation systems, and taxation system on act of purpose. These reforms brought China' s taxation systems onto a standardized and legalized road, made the value-added tax featuring fairness, neutrality, transparency and generality become the principal tax of China' s turnover taxes and constructed the turnover taxes and income tax into the major part of the entire taxation architecture. It unified the tax bearing of the enterprises by supplementing new auxiliary taxes, and, by means of tightening up the administration on taxation, intensified the macro-control on tax collection, coordinated the interests of all economic entities, promoted the development of market economy mad guaranteed social impartiality. The Price Law provides the basic principles of free pricing by the operators, responsibilities of the relevant pricing organizations, and control on the overall level of prices so as to regulate the pricing acts, give full play to the function of allocating resources via pricing, stabilize the price level in the market, and realize effective adjustment of prices. Here, it is important to note that the Price Law provides a hearing system for pricing which is an essential part of the modem administrative procedure law. According to dais system, some specific items shall be priced with the hearing of the government, adjusting or pricing applicant, and the consumers, thus bringing the administrative acts of pricing of the government into a legalized way mad standardized procedures, and creating conditions for drawing more democratic, rational and fair conclusions.

As early as in 1985, China has constituted the Accounting Law that was amended twice in 1993 and 1999. In November 1992, the Ministry of Finance issued the General Principles of Business Finance and the Criterion of Business Accounting, and other 13 industry-specific accounting systems and 10 industry-specific financial system, all of which overthrew the accounting mode that was constructed based on the planned economy and had been used for over 40 years, and set up a new one in conformity with the international practices adapting to the market economy. It was not until 2000 when the State Council issued the Regulations on Corporate Financial and Accounting Statements in June and the Ministry of Finance issued the Corporate Accounting Ordinance in December that a complete nationwide accounting architecture was eventually framed consisting of the accounting laws, corporate accounting ordinances, industry-specific accounting codes and corporate accounting codes. In the course of formulating and polishing the accounting ordinances and codes, China has attached much importance to referring to the international accounting ordinances. Till now, the basic corporate accounting ordinance and 16 detailed implementation rules have been promulgated and publicized, covering disclosure by the affiliated party, change of accounting policies, fixed assets, cash flow statement, etc. These reforms have made great strides within a short period, and have brought many aspects in line with or closer to the international accounting ordinances. As an important component in China' s financial reforms, the reforms of accounting system have exerted great influence home and abroad, and have been worldwide recognized. In the government meetings of the UN and the expert teams conferences, all the representatives from the International Accounting Rules Commission and the World Bank considered that China is the most typical sample for the accounting reforms of the countries in transition and the developing countries. In the future, China will speed up its pace in the reforms of accounting system along with the improvement of domestic market economy mechanism and the development of the international accounting criterion.

(Ⅵ) Legislation on Labor and Social Security

In respect of the legislation on labor and social security, the labor law and Trade Union Law were successively constituted. Being the first law on labor after the foundation of the People's Republic of China, the labor law is dedicated to the protection of the laborers' legal rights and interests, regularization of the labor relations, setting up and preservation of a labor system in favor of the socialist market economy, and the improvement of economic development and social progress. It explicitly provides the activities in enhancing the employment rate, execution of labor contracts and collective contracts, working hours, resting hours, wages, labor security and hygiene, particular protection for female employees and underage workers, social insurance, welfare, labor disputes, supervision and inspection, legal liabilities, etc. In addition, in order to impel the reforms of state-owned enterprises, the State Council and the Ministry of Labor and Social Security published lots of administrative rules and regulations on labor and social security. The experiences in the development of foreign market economy explain that the normal operation of a market economy shall not only rely on the above rules on the behaviors of market entities and the laws and regulations on maintaining market order, but is conditioned upon social security which requires the guaranty from perfect labor and social security legislation.

(Ⅶ) Building Judicial Review System

Concerning the construction of judicial review organizations and relevant proceedings, China equipped all people's courts wit h administrative divisions, and promulgated the Administrative Procedure Law in 1989. This law founded a systematic and complete judicial review system of China. It contains various important substantive regulatory articles and some articles that show a form of procedure but should be interpreted from the view of substantive law. These articles can be grouped into either those on the supervision and control by the people's courts on the execution of power by the administrative organizations (on the range and proceedings of judicial review) , or those on the obligations of the administrative organizations. They also granted the opposite party of common citizens with equal legal status to the administrative organizations in litigation, thus restricting the behaviors of these organizations in some way. As for relief of rights, it is stipulated therein that any citizen, business corporation or other organization who considers a concrete administrative behavior of an administrative organization or an administrative worker infringing his/her legal rights and interests is entitled to bring a lawsuit against the said organization or worker to a people' s court according to the Administrative Procedure Law, and that the people' s court, according to law, shall independently exercise its judicial power on such administrative case, in disregard of any interference by administrative organizations, nongovernmental societies or individuals.

The laws and rules enacted or amended by China in accordance with the WTO rules have stipulated the judicial review in succession. For instance, the newly revised Patent Law, Trademark Law, and other property rights laws have revoked the final awarding power of administrative organizations and entitled the party concerned to bring administrative lawsuits; the newly promulgated administrative rules on antidumping, countervailing, importation and exportation of goods, importation and exportation of technologies, and other aspects of commodity trade and trade in services have specified the corresponding judicial review. The Rules of the Supreme People " s Court on Some Issues in Judging Administrative Cases of International Trade which was passed in August 2002 and took effect on October 1 further expanded the range of judicial review, specifying that any natural person, business corporation or other organization who considers a concrete administrative behavior concerning the foreign trade of an administrative organization o1" an administrative worker with administrative power within the People's Republic of China infringing his/her legal rights and interests is entitled to bring a lawsuit against the said organization or worker to a people' s court in accordance with the Administrative Procedure Law, and other laws and rules. The Rules on Some Issues in Judging Antidumping Administrative Cases and Rules on Some Issues in Applying Laws for Judging Countervailing Administrative Cases which were resolved in November 21, 2002 and will take effect on January 1, 2003, are important judicial interpretations of the Supreme People ' s Court for the reference of the people's courts to judge the antidumping and countervailing administrative cases concerning the WTO rules under the new situation after China's accession to the WTO. They will exert significant and long-lasting influence on the people's courts at different levels in terms of observing the WTO rules and the responsibilities for judicial review as stipulated in China" s accession documents, maintaining the legal rights and interests of the organizations and individuals involved in the investigation of antidumping and countervailing eases, and supervising and urging the competent administrative organizations of antidumping and countervailing to administrate according to law.

In relation to protection of rights and interests, China' s system is well arranged. Generally, foreign countries only focus on the protection of the "rights" while our judicial review, in addition to doing so, even surpasses our foreign counterparts in protecting of the "interests", especially in dealing with the nonfeasance of the administrative organizations. It can be deemed that, in adjudicating concrete administrative acts, the administrative litigation of China has not only reached the WTO requirements, but outrun in terms of the rules and practices in some aspects.

To sum up, since the reforms and opening-up, China has ceaselessly made systematic innovations towards the goal of establishing a socialist market economy, and gradually impelled the construction of the market-oriented legal system. China has outlined its market-oriented legal system, and is adapting its legal system to the WTO rules.

(China.org.cn November 7, 2003)