Enterprise reform in China : the
            evolving legal framework
Enterprise reform in China since 1979
            has been supported by accelerated reform of China's
            legal framework. In the transition to a "socialist
            market economy", state enterprises will operate
            independently of the government, may no longer be fully
            owned or controlled by the state, and will deal with the
            state and other legal entities through market based
            transactions. The number of collective (township and
            village) enterprises has grown rapidly, and in recent years
            so has the number of private enterprises. This level of
            economic change requires a commensurate level of legal
            change. The author describes the legal framework needed for
            enterprise reform in the world's most populous country.
            First, it is essential to define the enterprise and its
            rights and obligations. To define and broaden the autonomy
            of enterprises, enterprise law and regulations must be
            reformed. For state and collective enterprises, a goal of
            legal reform is also to effect the separation of ownership
            and management. To create a legal environment in which all
            enterprises - including state enterprises -participate as
            independent actors, reform is also needed in the following
            areas. Bankruptcy and competition law, to promote fair
            effective competition among autonomous enterprises and to
            ensure the continued protection of the public interest even
            without direct state management of enterprises. Financial
            laws, including securities laws and regulations, so
            enterprise financing can take place in a market driven
            system rather than through a planning mechanism. Laws
            governing land use, mortgage financing, and pension and
            social security systems, to separate employee housing and
            pension and social security systems from enterprise
            obligation and henceforth to provide housing pensions, and
            social security through alternative means. Contract law, to
            protect the legal rights of enterprises and allow economic
            transactions between parties to replace administrative
            controls, and to ensure that the court system and dispute
            resolution processes function credibly and reliably, thereby
            making all other reforms enforceable. To make these reforms
            meaningful, property rights must also be better defined.
            China's civil code currently offers only a limited
            definition of the rights of ownership and of an
            enterprise's rights to sell, transfer, or otherwise
            dispose of property. The author catalogs these pieces of the
            legal framework, suggesting where further reform is needed
            to support enterprise reform; focuses on the reform of state
            enterprises but also discusses the reform of nonstate
            enterprises; and touches only lightly on the role of foreign
            investment but does address the developing framework of
            patent, trademark, and copyright laws,