China turns to 'rule of law' for business disputes

Featured - August 14th, 2012

The rule of law is making inroads in China’s sprawling business activities amid the economic downturn. According to the Financial Times, Chinese courts are now apt to deal with litigation cases that have become increasingly prevalant.

Business cases shot up 25% from the first half of last year to 376,000 in the same period this year, according to the government. Arbitration increased 22% from a year earlier from last year’s settlements worth Rmb113 billion (US$17.7m). China has developed its law studies and practice, including the creation of specialized economic and financial courts to deal with certain kinds of dispute; courts now have the ability to freeze assets.

“People are more conscious of their legal rights, so when it comes to disputes, they start to use legal remedies rather than other approaches. That’s a good development. Before, if there was a dispute, they sometimes just got into a physical fight,” Luka Lu, managing partner of Beijing law firm Capital Associates, told FT.

Among the most known cases is the Fosun Group-Soho China case, over acquisition of a prime land in Shanghai. Two of China’s biggest banks, Everbright and Minsheng, sued a series of small steel companies for allegedly failing to repay loans. China is also embroiled in a trade case with the EU over its Chinese telecommunication equipment companies.