China needs a robust constitution with bite
Winston Mok says China's promised new era for the rule of law will help balance power at the local and provincial levels, reducing corruption and conflict, while boosting economic growth
More than three decades after the passing of its 1982 constitution, China is commemorating its first Constitution Day this week, heralding a new era for the rule of law. As argued by economist Friedrich Hayek, the market can only work effectively under the rule of law. Businesses and individuals will invest with confidence under known and clear rules, free from capricious government action.
According to the World Economic Forum, China has weak property rights and intellectual property protection, and even weaker investor and minority protection. While China's economy has enjoyed spectacular growth for decades, it may soon be trapped under a glass ceiling unless it makes the transition to a more rule-based economy.
China has been making practical steps to improve the rule by law. Local courts were made financially independent from local governments. Court administration has been streamlined and judges now have greater professional independence. At the recently concluded fourth plenum, China made the rule of law the new modus operandi for governance.
Beijing needs to look no further than Hong Kong as a model for legal reforms. Hong Kong is ranked fifth by the World Economic Forum in judicial independence, the highest in Asia. In fact, the city ranks among the world's top 10 in various indicators, from property rights (sixth) to investor protection (third).
But the rule of law has a much more fundamental meaning. Hayek defined it as the opposite of arbitrary government. In the report of the World Justice Project, mainland China is ranked very low on constrained government. To address this, the fourth plenum decisions outlined reforms in the legislature, executive and judiciary - including greater separation of the three.
On the mainland, the key checks on the government have been the Central Commission for Discipline Inspection and the National Audit Office. The legislature and the judiciary may become increasingly important balancing forces.
Local governments will be made more accountable, and are expected to govern in accordance with the law. In a nutshell, the age of local administrations interfering with the judiciary has passed, and the time of administrative power checked by the judiciary has come. Such a transition may hopefully be completed by the end of the decade - the time frame President Xi Jinping has set for the modernisation of governance.
At the recent 60th anniversary of the National People's Congress, Xi said it should effectively fulfil its important role representing the people. But the annual meeting of a cast of thousands limits its role beyond rubber-stamping. National, provincial and local people's congresses have been platforms for collecting ideas rather than supervisory organs. After protracted and intense bargaining, the recently passed Budget Law may begin to change that. Fuller disclosure, closer review and tighter monitoring may be expected for government budgets. It is difficult to provide genuine oversight just through the brief annual national people's congresses. Perhaps reform will start at local and provincial levels, where the congresses could meet more frequently and for longer to allow for substantive discussions. Just as vital will be how the congresses' standing committees are independently selected and how they function.
In Hong Kong, the government's plan to develop the northeast New Territories, for example, must obtain approval from the Legislative Council at key steps along the way. Even without full democracy, Hong Kong has enjoyed the rule of law - not only though an independent judiciary, but also with significant restraints on executive power through the legislature.
If local governments on the mainland are subject to similar discipline, development may proceed more slowly, but with less wastage and corruption, or conflicts with the people.
In most provinces, the local party boss who heads the executive also leads the local legislature, which severely hampers its oversight effectiveness. A separation of leadership for the legislature from that of the executive, similar to the arrangement in Beijing, Shanghai and Guangdong, will provide the needed independence. At the very top, they may remain ultimately led by the ruling party - a reality on the mainland. Such separation, at the provincial level and below, actually allows Beijing to better enforce national policies, as was successfully adopted by past dynasties to strengthen their control of the regions.
China's key challenge is how to escape the "middle-income trap", for which it must find its own path. Amid the spectrum of market economies, from Germany to the US, from Singapore to Hong Kong, a clear theme unifies the successful ones: the rule of law with a level playing field. For China to unleash the creative forces needed for its next stage of innovation-driven growth, its people must be confident of the full protection of their rights in a just system free from unfair intervention.
The fourth plenum, which has defined a more limited government, is an important step forward. If this can truly bring about a new culture of the rule of law, it will be a historical watershed for China's entry into modernity.
