Though introduced relatively late, China’s robust Company Law and Bankruptcy Law have broad, practical applicability. Photo: CFP

As domestic consumption recovers and the industrial economy continues to rebound, international trade is also picking up. In light of this, it is necessary to re-evaluate the underlying assumptions, normative roles, and practical impacts of both commercial and economic law. 

In the short term, given the current economic recovery, commercial law may be less effective and practical due to its indirect, passive, and arbitrary nature, while economic law having become more advantageous due to its directness. As a tool for state intervention, the latter can serve to guide, promote, and help facilitate economic development. However, the difference in the roles of the two laws – whether standing at the forefront to guide the economy or being at the back to promote it – is not the essential factor that determines their advantages or disadvantages. Rather, it is a matter of pace, timing, and points of strength. At the end of the day, their commonalities are greater than their differences, and their synergy is bound to be better than their separation.

Relative position 

Commercial law, as a private law, exhibits a passive approach in adjusting economic relations by avoiding interference and only intervening after the fact. It is indirect in that it does not involve direct state intervention in the economy. It adopts a laissez-faire attitude, and primarily relies on arbitrary norms that are non-binding. These characteristics do not align with society’s need for fast, efficient, and direct intervention, guidance, and proactive legal adjustments as the country seeks to accelerate economic and social recovery.

Of course, commercial law has positive effects in meeting the needs of business people, facilitating market resource allocation, and stimulating market vitality. However, its profit-oriented philosophy is limited by the constraints of customary law, the weakness of theoretical foundations, and the complexity of its own system. Its core values still prioritize the autonomy of will, protection of rights, and individual welfare. The society-oriented social value ultimately remains an external constraint and a formality.

As capitalism enters the stage of socialized development, social division of labor and collaboration has become increasingly sophisticated. The strength of the market alone becomes inadequate and insufficient, while societal awareness and demands for the public interest grow stronger. The state and government gradually permeate all aspects of economic operations, creating a multidimensional and dynamic landscape. This landscape features the integration of public and private sectors, prevailing policies, and even government dominance. It is from within this context that economic law emerges.

In the current economic and social environment, there is a pressing need for accelerated recovery. Countries face various challenges to different degrees, such as difficulties in small and medium-sized enterprise operations, weak consumer demand, increasing wealth disparity, and regional imbalances in development. These issues cannot be fully resolved solely through the functions of commercial law. The state requires a legal framework that can directly regulate and guide economic and social development, and stand at the forefront of economic development to guide its progress. This framework is essential to expedite the process of economic revitalization. This responsibility naturally falls on economic law, as it has the ability to transcend the boundaries of autonomy of will and state governance, and deal with economic relations in a manner that integrates the public and private sectors.

The logic behind the origins of economic law follows the chain of “laissez-faire, market failure, state intervention.” However, state intervention should be the theoretical foundation of economic law, while market failure is only one of the major factors. The proactive role of the state in exercising economic management functions and actively participating in economic governance to achieve certain national economic governance goals should be the real focus. These goals may address phenomena such as monopolies, negative externalities, and information asymmetry caused by market failure, as well as government policy implementation, industry support, and economic stimulus measures.

The origins of economic law vary from country to country. In China, economic law did not arise from market or government failure, but rather from the reform and opening-up of its economic system. It is a product of transforming the country’s economic functions. Therefore, when examining the history of economic law, it is crucial to grasp the importance of state intervention and adhere to the main objective of achieving national economic governance goals and exercising national economic functions. This approach leads to a logical chain from the formation of economic law to its utility, that is, the positive role it plays in the operation of the market economy and the development of the national economy.

Economic law, on the other hand, is an effective tool for adjusting unique relationships, which explains its distinctive advantages over commercial law. If we zoom in to the current economic recovery, we can see how useful economic law could be in undertaking more tasks and achieving greater efficiency. Every hot discussion taking place in China’s research on economic law is caused by significant economic system reforms, major economic events, or significant strategic adjustments. Economic law not only has the core attribute of “intervention,” but is also responsive and problem-oriented.

It can be said that the success of economic law can be attributed to its ability to address real needs and be highly responsive to practical situations. Therefore, in the face of strong economic recovery demands, economic law should fully leverage its own strengths. It should be guided by new problems arising in the market economy, promptly respond to new situations and circumstances, address new issues related to national economic governance practices and social public interests, and promote and safeguard macroeconomic and market regulation through the formulation, modification, and implementation of laws and regulations in various economic sectors. By doing so, economic law can better facilitate and ensure the effectiveness of national macroeconomic and market regulation.

Mutual promotion 

Commercial law and economic law face different situations and tasks, and therefore exhibit distinct characteristics and tendencies. Commercial law may be temporarily inefficient and ineffective, while economic law carries the heavy burden of relief and promotion. This also reflects the differences between the two laws. However, these differences are merely temporary, and collaboration and mutual promotion remain the main theme.

First, the way commercial law adjusts legal relationships between equal commercial subjects reflects the deep cultural heritage and customary traditions of a country and society. It serves as the foundation for the people’s pursuit of profits and transaction safety after the generalization of the concept of business people. Despite significant changes in the economic and social spheres, commercial law will continue to demonstrate considerable resilience and tenacity, persisting strongly in the potential economic reforms and social progress that may come. 

China’s Company Law and Bankruptcy Law were introduced relatively late and took longer to be revised, but they have a wide scope of application and strong practicality. The dominance of economic law regulations can only manifest themselves based on timing and circumstances. Even with state intervention, when implemented, regulatory measures and requirements must still align with the basic commercial legal relationships established between private entities. Economic law’s focus on safeguarding macroeconomic measures to stimulate the economy and promote development can only be used for a specific time or specific matters, while commercial law is dedicated to constructing the economic rationality of market entities and upholding long-term freedom, equality, and efficacy.

Second, different legal needs may require involvement from different legal departments for the same relationship. These departments may abide by different bases, purposes, and principles when adjusting a particular social relationship. This allows for comprehensive legal adjustments, enabling the law to effectively respond to and serve the economy and society. When facing difficulties, businesses not only need the reconciliation and reorganization mechanisms provided by bankruptcy law to resolve conflicts, but also require favorable regulatory adjustments from economic laws such as finance, taxation, and market management. Economic law itself transcends the traditional dichotomy of public and private, and it applies comprehensively through its function of comprehensive system regulation. On the other hand, commercial law has evolved into a diverse and complex system with a tendency towards becoming more like a public law. Therefore, the adjustment of economic relationships does not have to correspond directly to commercial and economic laws, but should applied based on different goals, needs, stages, and scenarios in a coordinated and comprehensive manner. 

Third, with its profit-oriented approach, commercial law satisfies the needs of all equal commercial subjects under a market economy. Whereas economic law achieves the same value pursuit through coordinating public power and private rights. Commercial and economic law share the common objective of legal application. When facing issues such as economic recession, industry shocks, weak consumption, and increasing inequality, countries have begun to see the boosting of the economy, market, and efficiency as their primary governance goals. These objectives are also in line with the value goals of commercial and economic law. The first article of the Company Law divides its legislative purposes into two branches: regulating corporate behaviors and protecting the rights and interests of entities. These purposes, of course, align with the value assumptions of traditional commercial law theory. However, maintaining economic order and promoting economic development are also important regulatory purposes, which are inherently consistent with the legislative purposes of economic laws such as the Price Law, Anti-Monopoly Law, and Budget Law.

Fourth, there is currently a need to boost the economy and stimulate market vitality, with small and medium-sized commercial subjects requiring more economic support and policy incentives. It is therefore necessary to prioritize provisions on budget formulation and adjustment in the Budget Law and related regulations, as well as the Corporate Income Tax. Law and rules regarding tax holidays in taxation-related regulations. Meanwhile, it is necessary to balance dispute resolution and interest coordination at the micro level, which is particularly crucial for the recovery and revitalization of SMEs. These enterprises may struggle with capital contribution, decision-making, finance, and management. Thus, it is crucial to apply the rules in the Company Law concerning corporate governance, capital system, shareholder rights, and other aspects in a timely manner to regulate organizational behavior and protect the interests of entities.

Yan Ke is from the Head Office of the Agricultural Bank of China. 

Edited by WENG RONG