As its title suggests, Tamar Groswald Ozery's book Law and Political Economy in China: The Role of Law in Corporate Governance and Market Growth uses a political economy lens to examine the role law has played in China's economic development story, the growth of firms and markets, and the evolution of corporate governance mechanisms in China over the past 40 years. Throughout, she focuses on the political functions of law to make the case that law's dual economic and political functions have been mutually reinforcing since 1978 but that the political valence of economic law has been largely overlooked to date. Her book aims to show how law has shaped political power dynamics across different stages of China's development, and how these dynamics have recursively impacted later phases of legal reform. By tracing the linkages between law, politics and economic development, her work sheds light on the paradoxes and tensions surrounding law's role in China historically and today.
The book is structured in three parts. It begins with a brief introduction to the challenges China poses to traditional thinking in law and development studies, new institutional economics and modern finance. Here Groswald Ozery argues that focusing on the political effects of law can help explain several enduring puzzles that earlier scholarship has missed, either by dismissing the role of law in China's economic development out of hand or expecting legal reform to lay the seeds for political liberalization, on the other. Part two of the book presents the core of Groswald Ozery's case. Here her analysis weaves together decades of interdisciplinary research on Chinese political-legal reform with observations from a comprehensive dataset of “market-related rulemaking” – the vast corpus of legislative, administrative and policy documents that form the infrastructure of Chinese economic law, starting from the late 1970s and continuing to the present. Based on her in-depth analysis of the substance and timing of market regulation over the past four decades, she divides modern Chinese history into three phases that reflect different approaches to law reform and the role of the party-state in market governance. In each, she explores how changes in market practice and policy were translated into law, and how law in turn reshaped policy priorities, the incentives of both market and political actors and, ultimately, the role of the party-state in the market over time. Part three of the book turns to the evolution of firms and capital markets since 1978 and the political economy of corporate governance, offering an extended case study and application of the book's core themes.
Given its broad scope and the depth of analysis that undergirds it, Groswald Ozery's ambitious work can be read at several levels. With regard to law and development, her book offers a rich account of why China invested so much in a rapid, far-reaching project of legal reform and how, in different periods, the party-state's instrumental use of formal law (even if poorly implemented) enabled it variously to consolidate power, manage the transition from the planned economy, implement industrial policy, tamp down on corruption and advance party-building in both state and non-state firms. This book can therefore also be read as an overarching historical account of Chinese legal reform and the institutions and influences that shaped it along the way. In this regard, it is a surprisingly accessible guide for readers unfamiliar with the key institutions and actors in the China's system, including the mechanisms of Party leadership and central–local dynamics, the history of key administrative agencies and the process of personnel appointments in the state sector. Finally, the book offers an in-depth account of the emergence of firms, corporate groups and corporate governance institutions in China, highlighting again the critical political functions of law and the strengths and weaknesses of this system for constraining corporate actors.
Some aspects of Groswald Ozery's analysis do not break new ground so much as offer new support for earlier observations about, for instance, the instrumental use of law in service of policy in the PRC, and the importance of less formal sources of order as substitutes for law while the legal system was in its early stage. As she acknowledges, the book's focus on formal legal construction also necessarily limits its attention to the role of civil society, informal norms and practices, or the influence of external factors that demanded a more developed and transparent legal system – most obviously, China's WTO accession and waves of inbound investment. She also intentionally excludes consideration of the enforcement or implementation of law. A key exception is part three of the book, where she focuses on how China's unique political and economic context affects the application of standard corporate governance tools to Chinese firms with diverse ownership structures. This informative discussion does, however, sometimes create a disconnect from the earlier sections of the book, since it engages heavily with concepts and literatures more familiar to corporate law specialists than to political scientists or even to legal scholars in other disciplines.
Overall, this book offers an important corrective to standard accounts of the role of law in China that have often over-emphasized the economic effects and rights-securing functions of law and have tended to assume that economic law (unlike public law) is politically neutral. Her work also counters the notion that politics necessarily weakens the authority of law. Given the complex dynamics of the “political mobilization of law,” Groswald Ozery argues that China has not created a growth model or roadmap that is transferable to others (p. 26). All of these are important insights in 2024, at a time of heightened politicization of corporate governance and as China introduces the first major revisions to its Company Law in nearly a decade. Groswald Ozery's work also aligns with that of other legal scholars who have observed that many of the quirks of the Chinese legal system are “features,” not “bugs” (Donald Clarke, “Order and Law in China,” University of Illinois Law Review, 2022, pp. 541–595) and so must be understood in that light.
In sum, Law and Political Economy in China makes a compelling case that the political functions of law have been at least as significant in shaping China's development path as the role of law in the economy and in markets. Her work should be of interest to political scientists, corporate governance scholars, law and development experts, and China specialists, but also to anyone seeking to understand the role of law in China, both past and present.
