Xi's Vision: Rule of law lifts business environment

Thanks to the establishment of specialized courts, including those involving finance and intellectual property, disputes in relevant fields have been resolved more efficiently, demonstrating that China's efforts to optimize the business environment by rule of law have been further strengthened, legal experts said.

The effective operation of such courts has also played a big role in advancing high-quality development and high-level opening-up, they added.

In the world's second-largest economy, building a sound business environment to attract more investors and providing them with equal and strong protection, whether they are domestic or foreign, State-owned or private, have always been a top priority, as required by the central leadership.

In the past decade, various reforms and measures in the realm of legislation and law enforcement have been put in place to boost law-based governance in China.

Adhering to comprehensive rule of law and deepening reform on the track of rule of law are also among the topics of the third plenary session of the 20th Central Committee of the Communist Party of China, which opened on Monday in Beijing.

The third plenum will deliberate on a key policy document on deepening reform across the board and advancing Chinese modernization, the CPC's core leadership has said.

President Xi Jinping has highlighted the significance of the business environment on multiple occasions, emphasizing the need to continuously deepen reform.

On Feb 25, 2019, Xi, who is also general secretary of the CPC Central Committee and chairman of the Central Military Commission, underscored that law-based governance represents the best business environment, requiring implementation of the principle of equality in sectors ranging from legislation and enforcement to judicial protection and the observance of laws.

The remark was made by Xi while he was presiding over a meeting of the Commission for Overall Law-Based Governance of the CPC Central Committee.

"Xi's speech not only emphasized the importance of the business environment, but also showed that the construction of the business environment is a systematic project," said Song Yahui, a law professor at Nanjing University in Jiangsu province, in a recent article published by Chinese Social Sciences Today, the official newspaper of the Chinese Academy of Social Sciences.

Noting that the project involves many aspects, such as fair competition, protection of property rights, market supervision and international trade, Song said that all these areas "need to address a fundamental issue, which is the rule of law".

Only rule of law "can uphold the transaction security that businesspeople value the most", he added.

While suggesting that the country optimize the business environment through sound legislation, he added that fulfilling the goal also relies on a high level of judiciary.

Professional adjudication

In the past 10 years, China has set up a number of specialized courts to pool high-quality judicial resources and gather legal talent, aiming to better resolve disputes through more professional adjudication.

The Beijing Financial Court is among them. As a chamber specializing in tackling finance-related civil and administrative disputes, such as those involving insurance and securities, the intermediate-level court was established to keep up with the country's rapid financial growth, as well as to bolster the business environment and enhance financial governance capability by rule of law.

Data showed that from March 18, 2021, when the court was launched, to May 31 this year, it heard more than 23,500 cases involving a total of more than 830 billion yuan ($114.3 billion).

The court also partnered with the Beijing Federation of Industry and Commerce to build an office in July 2022 to focus on optimization of the business environment.

"Our job is to discover struggling but potentially viable businesses through evaluation, and then help reshape their market vitality," said Xu Nan, an official responsible for the office in the court.

For instance, a dispute between a photovoltaic power enterprise and a Beijing-based financial leasing company was successfully resolved with the aid of the office.

The photovoltaic power enterprise obtained more than 700 million yuan in financing from the Beijing company for upgrading its power generation equipment in 2022. However, due to the breakdown of the capital chain, it was unable to repay the loan on time, leading to the Beijing enterprise suing it in the court. After trial, the power enterprise was ordered to pay off the loan.

When the court urged the photovoltaic power enterprise to comply with the ruling, "we found its equipment upgrading was in response to the country's low-carbon policies, and it had collaborated several times with that financing company, with a good credit reputation", Xu recalled, adding that a rescue of the company seemed possible.

"Therefore, we decided to conduct a thorough evaluation of the photovoltaic power enterprise, asking some judges and new energy specialists to visit the defendant and talk to local government to learn more about the previous business operation, resulting in the compilation of an evaluation report," he said.

According to the report, the trust between the two companies could be repaired, and the upgraded equipment could generate electricity revenue, meaning the photovoltaic power enterprise would have the ability to repay the loan.

In addition, the report said that the nation's low-carbon policies presented development opportunities for the new energy industry, indicating that there was room for an increase in the market valuation of the photovoltaic power company.

"Compared with rigidly pressuring businesses to repay debts or go bankrupt, the office's goal is to provide a better solution for both sides involved in a case, benefiting their long-term development," Xu said.

"In the office, judges should ensure that the way to rescue companies complies with laws, while experts need to explain the current situation and trends of the industries to guarantee the implementation of solutions," he added, describing this as a legal innovation in financial governance.

So far, the office has resolved 62 cases this way, covering various fields such as new energy, modern logistics, private healthcare and advanced technology. The resolutions not only safeguarded the jobs of over 80,000 people, but also stabilized the interests of more than 2.3 million investors, according to the office.

Specialized courts are not a recent phenomenon. Even earlier, the establishment of maritime courts had contributed much to solving disputes and serving a market-oriented, internationalized and rule-of-law business environment.

Among them is the specialized Ningbo Maritime Court, which opened in 1992 to hear maritime and commercial cases in Zhejiang province.

As China has further opened its doors to the world, the number of foreign-related maritime disputes has been rising, which prompted courts in China to attach greater importance to optimizing the business environment, said Du Qian, president of the Ningbo court.

Growing trust

In September 2022, for example, a Liberian container ship and a large Panamanian oil tanker collided near Malaysia, causing severe damage to both vessels, which were owned by two companies registered in the Marshall Islands. After the accident, the Panamanian vessel underwent repairs in Zhoushan, Zhejiang.

The container ship's owner subsequently submitted a request to the Ningbo court for detention of the oil tanker, and the two sides agreed to have the dispute handled by that court.

The court ruled in December 2023 that the oil tanker's company was primarily responsible for the accident. It ordered the company to pay 34 million yuan in compensation to the other side.

According to international treaties, several countries, including Malaysia and Panama, had the jurisdiction to handle the case, but the two litigants ultimately chose the Ningbo court and agreed to abide by its judgment. "It reflected the trust of the foreigners in our handling of maritime disputes," said Du, the court president.

"Improving the quality and efficiency of handling such international maritime disputes helps promote the building of fair, open and transparent market rules," she said. "It is also conducive to boosting the confidence of businesses at home and abroad."

In her view, this confidence applies to both the improvement of trial procedures and optimization of the business environment.

The court has also increased exchanges with business federations and offered law education for enterprises, Du said.