The curious model of internal monitoring mechanisms of listed corporations in China: The sinonisation process

Abstract

Abstract Corporate governance in China has gone through enormous changes since China embraced the idea of market economy in 1978. Most of these changes were initially inspired by the German and Japanese but more recently by the Anglo-American systems. There have been varying degrees of success and failure in this process. What are the reasons behind its success and failure? What is the way forward? In this article, we focus on the evolution of internal monitoring mechanisms in listed companies to explain that the process of borrowing foreign law in China is not a simple process of convergence or persistence, as is believed by the convergence and persistence schools. It is a process of what we call sinonisation and this is the reason behind its success and failure. As we attempt to explain, the sinonisation process is the right approach for China given its current state of economic, social and political development. Thus, it is not helpful to critique the Chinese system from the convergence or persistence perspective. China needs to develop its own model and the sinonisation process allows this to happen. However, Chinese law-makers and reformers need to recognise the weaknesses in the sinonisation process and take steps to remove these impediments in order for a workable model to be developed. © 2011 Copyright T.M.C. Asser Press and the Authors.