Hong Fan Commentary (Volume 2, Issue 3)

Author: Wu Jinglian, Jiang Ping (editors)
Publisher:
Publish Date: 2006-01-01
Features: The "Theme Forum" section of this issue features a series of articles on regulation. As market-oriented reforms deepen, the importance of regulatory system construction has garnered increasing attention. The administrative license law special issue in the previous issue of this journal actually addressed some aspects of regulatory issues. However, just as the formulation and implementation of the Administrative License Law faced several serious problems, regulatory system construction is still far from meeting expectations and the actual needs of society. In a letter to the editors, a long-term friend engaged in regulatory research criticized: In China, the construction of regulatory systems, which should match the market economy system, has lagged behind. Although there are a number of institutions named "regulatory," few truly understand the difference between rule-based intervention under market economy conditions and traditional administrative intervention. In recent years, the China Securities Regulatory Commission has begun to perform the work that regulatory institutions should do, as a result of which a large number of fraudulent companies have been exposed (but not severely punished), while investors blame the regulatory authorities for collapsing the stock market! So, what does a regulatory system that matches the modern market economy look like? To establish and improve a modern regulatory system, what aspects should be addressed? To some extent, regulation helps reduce transaction costs, yet just as the by-products of regulatory activities can increase transaction costs on the other side, regulation itself also incurs costs, which are not only substantial but also not necessarily necessary. Therefore, a reasonable regulatory system should include and be able to pass some form of cost-benefit test. The last article in the Theme Forum also touches on Japan's regulatory system reform and the U.S.-Japan economic relationship. The author, as a lawyer in the U.S. Department of Justice, has participated in a series of economic negotiations with the Japanese government, giving them a deep understanding of the U.S. government's stance and the current state of Japan's regulatory system. Through this article, we can gain more information beyond the two themes mentioned above, such as the national interests involved in regulatory system reform in one country against the backdrop of economic globalization, thereby also deepening our understanding of the significance of China's current regulatory system reform. From these last two articles, we also realize that many problems in regulatory systems are not unique to developing countries, which provides us with the possibility of learning from and drawing on regulatory experiences from economies of different institutional types and levels of development. Another article also holds significant implications for learning and reference. This article titled "A Comparative Study of Contract Enforcement Mechanisms in Transition Economies" does not include China but is clearly relevant to Chinese social and economic development. Based primarily on experience studies in the former Soviet Union, Eastern Europe, and Vietnam, the author compares the application, effectiveness, and interrelationships of three different contract enforcement mechanisms—bilateral reputation mechanisms, multilateral reputation mechanisms, and third-party legal enforcement mechanisms—in these regions. The author's findings will not surprise us: in these regions, legal mechanisms are relatively the weakest form of contract enforcement, due to their shortcomings in both fairness and efficiency. Professor Bai Ke's paper shifts our attention to another field, equally important and equally perplexing: the state of crime in Chinese society at the turn of the millennium. Since the reform and opening-up, alongside economic transition and social transformation, the crime situation in Chinese society has also undergone significant changes. However, for various reasons, the statistical data published on these changes are either incomplete or inaccurate, and systematic empirical research is particularly lacking. This not only hinders our understanding of related issues but also makes it difficult for policymakers to make correct judgments and formulate effective policies to reduce crime. Professor Bai Ke places China within an international comparative framework, comprehensively utilizing data from official sources and surveys by international organizations, aiming to objectively paint a relatively accurate picture for us. At the same time, he also attempts to explore the social causes of crime and identify solutions. This effort is undoubtedly beneficial in addressing the shortcomings mentioned above.