File Download

There are no files associated with this item.

  Links for fulltext
     (May Require Subscription)
  • Find via Find It@HKUL
Supplementary

Article: Finance Without Law: The Case of China

TitleFinance Without Law: The Case of China
Authors
KeywordsChina concepts stock
Variable interest entities (VIE)
Chinese-issued dollar bonds
Keepwell deeds (KWD)
Law and finance
Issue Date2022
PublisherHarvard University, Law School.
Citation
Harvard International Law Journal, Forthcoming How to Cite?
AbstractCan there be a highly developed financial market without the legal protection of investors and creditors? The highly-influential law and finance literature is built on the assumption that legal protection is essential to the development of an impersonal financial market. This article investigates how two financial markets of trillions of dollars have developed extralegally in the past two decades risking regulatory enforcement and contract defaults. More specifically, I examine (1) how Chinese internet companies from Sina to Alibaba have designed contracts to circumvent the Chinese government’s ban on foreign capital in certain industries and (2) how Chinese entities and foreign investors contract out of China’s stringent regulations on the issuance of international bonds. These extralegal contracts incur significant legal uncertainties and are unlikely to be enforceable in Chinese courts. Nevertheless, numerous international investors have invested in China through such contracts, providing capital essential to the country’s economic growth over the past two decades. My research reveals that (1) the extralegality of both the internet and international bond markets originates from China’s struggle between development, which requires access to the international capital market, and control, which requires keeping both Chinese enterprises and foreign capital on a short leash; and (2) a combination of private and state reputation mechanisms sustains the above finance without law. Overall, the network of financial intermediaries that controls access to the international capital market, the industry-specific communities of Chinese entrepreneurs and corporations that need access to that market, and the Chinese state, which promotes stability and predictability in both markets despite their extralegal contractual basis, replaces judicial enforcement in supporting financial development of a remarkable duration and scale. The reputation mechanism mitigates but does not solve the problem of credible commitment from the Chinese government, whose balance of development and control is inherently political.
Persistent Identifierhttp://hdl.handle.net/10722/323740
ISSN
2019 Impact Factor: 1.650
2023 SCImago Journal Rankings: 0.201
SSRN

 

DC FieldValueLanguage
dc.contributor.authorQiao, S-
dc.date.accessioned2023-01-10T02:54:32Z-
dc.date.available2023-01-10T02:54:32Z-
dc.date.issued2022-
dc.identifier.citationHarvard International Law Journal, Forthcoming-
dc.identifier.issn0017-8063-
dc.identifier.urihttp://hdl.handle.net/10722/323740-
dc.description.abstractCan there be a highly developed financial market without the legal protection of investors and creditors? The highly-influential law and finance literature is built on the assumption that legal protection is essential to the development of an impersonal financial market. This article investigates how two financial markets of trillions of dollars have developed extralegally in the past two decades risking regulatory enforcement and contract defaults. More specifically, I examine (1) how Chinese internet companies from Sina to Alibaba have designed contracts to circumvent the Chinese government’s ban on foreign capital in certain industries and (2) how Chinese entities and foreign investors contract out of China’s stringent regulations on the issuance of international bonds. These extralegal contracts incur significant legal uncertainties and are unlikely to be enforceable in Chinese courts. Nevertheless, numerous international investors have invested in China through such contracts, providing capital essential to the country’s economic growth over the past two decades. My research reveals that (1) the extralegality of both the internet and international bond markets originates from China’s struggle between development, which requires access to the international capital market, and control, which requires keeping both Chinese enterprises and foreign capital on a short leash; and (2) a combination of private and state reputation mechanisms sustains the above finance without law. Overall, the network of financial intermediaries that controls access to the international capital market, the industry-specific communities of Chinese entrepreneurs and corporations that need access to that market, and the Chinese state, which promotes stability and predictability in both markets despite their extralegal contractual basis, replaces judicial enforcement in supporting financial development of a remarkable duration and scale. The reputation mechanism mitigates but does not solve the problem of credible commitment from the Chinese government, whose balance of development and control is inherently political.-
dc.languageeng-
dc.publisherHarvard University, Law School.-
dc.relation.ispartofHarvard International Law Journal, Forthcoming-
dc.subjectChina concepts stock-
dc.subjectVariable interest entities (VIE)-
dc.subjectChinese-issued dollar bonds-
dc.subjectKeepwell deeds (KWD)-
dc.subjectLaw and finance-
dc.titleFinance Without Law: The Case of China-
dc.typeArticle-
dc.identifier.emailQiao, S: justqiao@hku.hk-
dc.identifier.authorityQiao, S=rp01949-
dc.identifier.hkuros700004157-
dc.publisher.placeUnited States-
dc.identifier.ssrn4179436-
dc.identifier.hkulrp2022/48-

Export via OAI-PMH Interface in XML Formats


OR


Export to Other Non-XML Formats