Is there a positive relationship between law and economic growth? A paradox in China

Rita Yi Man Li; Yi Lut Li

doi:10.5539/ass.v9n9p19

Is there a positive relationship between law and economic growth? A paradox in China

Rita Yi Man Li
, Yi Lut Li

Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review

3 Citations (Scopus)

Abstract

Traditional theorists concur that good legal system has been linked with well-defined property rights, reduction in transactions costs, increase in investments, and economic growth. Nevertheless, China experienced a strong economic growth in spite of a poor legal system. To explore the reasons behind, this research paper reviews the literature about the relationship between law and economic growth from global perspective. After that, this paper tries to locate the reasons on why the formal rules and regulations may not have strong correlation with China's growth. The research concludes that while many people label Guanxi as something negative, Guanxi is an informal system of legal rules from a Western perspective, or de facto, China's style of legal enforcement. Nevertheless, as the Chinese economy grows, transaction costs may become too high if we rely on guanxi and good legal system is needed to ensure a sustainable economic growth.
Copyright for this article is retained by the author(s), with first publication rights granted to the journal.

Original language	English
Pages (from-to)	19-30
Journal	Asian Social Science
Volume	9
Issue number	9
DOIs	https://doi.org/10.5539/ass.v9n9p19
Publication status	Published - 28 Jun 2013
Externally published	Yes

Bibliographical note

Publication details (e.g. title, author(s), publication statuses and dates) are captured on an “AS IS” and “AS AVAILABLE” basis at the time of record harvesting from the data source. Suggestions for further amendments or supplementary information can be sent to [email protected].

Research Keywords

China
Economic growth
Law

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abstract = "Traditional theorists concur that good legal system has been linked with well-defined property rights, reduction in transactions costs, increase in investments, and economic growth. Nevertheless, China experienced a strong economic growth in spite of a poor legal system. To explore the reasons behind, this research paper reviews the literature about the relationship between law and economic growth from global perspective. After that, this paper tries to locate the reasons on why the formal rules and regulations may not have strong correlation with China's growth. The research concludes that while many people label Guanxi as something negative, Guanxi is an informal system of legal rules from a Western perspective, or de facto, China's style of legal enforcement. Nevertheless, as the Chinese economy grows, transaction costs may become too high if we rely on guanxi and good legal system is needed to ensure a sustainable economic growth. Copyright for this article is retained by the author(s), with first publication rights granted to the journal.",

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AU - Man Li, Rita Yi

AU - Li, Yi Lut

N1 - Publication details (e.g. title, author(s), publication statuses and dates) are captured on an “AS IS” and “AS AVAILABLE” basis at the time of record harvesting from the data source. Suggestions for further amendments or supplementary information can be sent to [email protected].

PY - 2013/6/28

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N2 - Traditional theorists concur that good legal system has been linked with well-defined property rights, reduction in transactions costs, increase in investments, and economic growth. Nevertheless, China experienced a strong economic growth in spite of a poor legal system. To explore the reasons behind, this research paper reviews the literature about the relationship between law and economic growth from global perspective. After that, this paper tries to locate the reasons on why the formal rules and regulations may not have strong correlation with China's growth. The research concludes that while many people label Guanxi as something negative, Guanxi is an informal system of legal rules from a Western perspective, or de facto, China's style of legal enforcement. Nevertheless, as the Chinese economy grows, transaction costs may become too high if we rely on guanxi and good legal system is needed to ensure a sustainable economic growth. Copyright for this article is retained by the author(s), with first publication rights granted to the journal.

AB - Traditional theorists concur that good legal system has been linked with well-defined property rights, reduction in transactions costs, increase in investments, and economic growth. Nevertheless, China experienced a strong economic growth in spite of a poor legal system. To explore the reasons behind, this research paper reviews the literature about the relationship between law and economic growth from global perspective. After that, this paper tries to locate the reasons on why the formal rules and regulations may not have strong correlation with China's growth. The research concludes that while many people label Guanxi as something negative, Guanxi is an informal system of legal rules from a Western perspective, or de facto, China's style of legal enforcement. Nevertheless, as the Chinese economy grows, transaction costs may become too high if we rely on guanxi and good legal system is needed to ensure a sustainable economic growth. Copyright for this article is retained by the author(s), with first publication rights granted to the journal.

KW - China

KW - Economic growth

KW - Law

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DO - 10.5539/ass.v9n9p19

M3 - RGC 21 - Publication in refereed journal

SN - 1911-2017

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SP - 19

EP - 30

JO - Asian Social Science

JF - Asian Social Science

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ER -

Is there a positive relationship between law and economic growth? A paradox in China

Abstract

Bibliographical note

Research Keywords

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