World Trade Organization and Chinese Legal System’s Functional Convergence


The World Trade Organization was established as an institution that would help liberalize and supervise international trade, particularly between member countries. The institution provides a framework for formalizing, as well as negotiating, trade agreements and solving disputes to ensure that participants adhere to WTO agreements (Malanczuk, 1999). Today, World Trade Organizations has 153 members in addition to other 30 participants who are seeking to acquire membership. WTO has always engaged in rule-making as well as rule interpretation on several new trade policies and issues, thus removing the national regulatory sovereignty from the Chinese government. Trade liberalization policies adopted by the WTO have reduced the China’s constructed buffer zones in attempts to remain relevant to the requirements of the organization.

The adoption of WTO rules in China

The integration and development of China’s labour market is one of the most significant outcomes of the adoption of WTO rules in the country. Labour market integration has moved from local to national labour market. Its labour system has transformed from an administered system to a labour market. It has made incremental and stock reforms to align itself with the requirements of the WTO, and has also transformed from a dual economy to what is now seen as an integrated economy.

The liberalization of the Chinese economy

However, the liberalization of the labour market in China has enhanced allocative and technical efficiencies. These reforms in labour policy have increased China’s high economic growth by contributing to efficiency improvement. It has as a result adjusted its labour policies in response to the regulations of the WTO. The labour policy reforms have depended on the level of market maturity created by the framework provide by the WTO. The government has adopted deregulation of labour mobility especially in rural-urban migration. It has, as a result relaxed the hukuo system which had placed stricter criteria for migrant workers (Changbao, Fang & Yang 2007). This has allowed rural workers to migrate to the towns and cities to look for employment. The labour policy reforms have denied the government the capacity to control the migration of workers, and the wages paid to workers. These have been left to be determined by market forces. The legal institutions play minimal role in wage formulation (Changbao, Fang & Yang 2007).

Labour market policies in China

These labour market policies are opposed to the institutional arrangements which China had earlier adopted under its planned system. The hukou system had controlled the mobility of workers from rural areas to medium-sized and big cities. The hukuo system required that the applicants of the program have permanent legal housing as

A replica of the class system, Hukuo is an ancient Chinese public administration system custom in which residents must register with government. Hukuo has changed with time.

well as source of living within the locality. Although the system still works, the reforms have allowed rural workers to seek job and live in the cities.

Conflict between the regulations of the WTO and the doctrines of the Chinese government, WTO has increased external transparency to Chinese citizens. As an institution, WTO has increased the engagement of civil society groups in issues that affect the public; has increased access to information and documents that were restricted in the past; and has also opened up negotiations between the government and non-governmental organizations. For a long time, the government of China had been autocratic and did not engage the public in formulation of its policies (Hocking 2004). Although WTO does not directly control domestic policy formulation process, WTO indirectly influences the policy settings by imposing expectations from its participants or member states. This has influenced the increase of accountability and transparency, and the implementation of structures and policies that reduce bureaucracies in the Chinese government. Today, the hearings, debates and judgments, and judicial rule-interpretations are openly disseminated to the public. These reforms in the China’s governance system have raised the legitimacy of public institutions in the country. Transparency in policy formulation ensures that those who represent the public in the governance systems and at different levels of the government propose policies that reflect the interest of their constituents. However, such aggressive positions by public.

The domestic policy also has major implication on the country’s foreign policy

representatives could sometimes lead to breakdown of negotiations. Such policy making procedures had not been the norm of the government of China. It was always characterized by bureaucrats and bureaucratic systems. China’s laws contain broad based provisions that results to detailed restrictions. This gives room for different interpretations by bureaucrats, and often varies as changes to the government policies are made. Chinese laws also allow the government to rule out activities that it believes to be harmful.

As a result, China has established institutions that allow the review of its administrative decisions that affect trade. It publishes its trade regulations and from time to time, responds to request for information made by other member states of the organization. However, WTO has not interfered with the legislative decision-making modes in the country despite the increase in judicialization role of the organization. China has increased the adoption of systems and policies that ensures that it complies with negotiated treaties. In the past, the Chinese government did not consider judicial proceedings in case the party contracted breached the agreement; it ordered specific performances (Jackson 1998). The country operated under a planned economy controlled directly by the government. To remain relevant to the systems of international trade, it adopts a socialist market economy where it integrates its planned economy with certain market aspects. This means that since its entry into the WTO, it has transformed its planned economy into a market-driven economy by adopting aspects of capitalism.

Chinese capitalism is characterized by private businessmen who control large portion of the economy through private investments. This is referred to as bamboo capitalism.

As a result, the government continues to control significant portions of its economy.


It is therefore conclusive to claim that WTO involvement in China has brought about conflict between the regulations of the WTO and the doctrines held by the Chinese government. China has gradually and decisively facilitated privatization, yet much of the economy is still controlled by the state. Public ownership remains as the foundation to the socialist market economy in the country. The government partially agrees to privatization particularly in small firms; however, it insists that large state corporations remain in the hands of the government as it tries to avoid transferring concentration of capital to foreigners (Chih-Chien 2000). This is opposed to WTO’s policy of privatization by member states. The government therefore relinquishes ownership of state owned enterprises by sale of shares to investors. However, it retains the majority stake in these state owned corporations. The corporate law helps the government maintain the means of production in the hands of the state. This underscores the privatization act of the WTO.

Reference List

Changbao, Z., Fang, C., & Yang, D., 2007. Regional Labor Market Integration since China’s WTO Entry: Evidence from Household Level Data. Institute of Population and Labor Economics, CASS. Web.

Chih-Chien, Y., 2000, A long march to capitalism: An overview on the modern legal frameworks of China’s corporate structure and stock market. Boston, Massachusetts: Massachusetts Institute of Technology.

Hocking, B., 2004. Changing the terms of trade policy making: from the ‘Club’ to the ‘Multistakeholder’ model. World Trade Review, Vol. 3, No. 1, pp. 3-26.

Jackson, J., 1998, The World Trade Organization: Constitution and Jurisprudence. London: Royal Institute of International Affairs.

Malanczuk, P., 1999. World Trade Organization. Encyclopaedia Britannica, Vol. 442, p. 305

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