Research on Legal Issues Relating to the Market Intermediary Agencies in China

Abstract

In modern market economy, market intermediary behaviors and agencies will be demanded when there is a transaction. Therefore, we can ascertain that there is hardly any mature and extensive market transaction without market intermediary‘s behaviors, and similarly, there is no active and developed market economy without the involvement of the intermediary agencies.
Although the intermediary behavior occurred long time ago, people have not clearly recognized the importance of its social and economic significance in the context of market economy. First, the intermediary behavior has evolved from a simple auxiliary means in civil communication or transaction into a "lubricant‖ for efficient operation of modern market economy. Secondly, legal professionals in the academic circle have a relatively narrow understanding of the nature of intermediary behaviors, which is limited to the civil and commercial fields, but fail to extend it to a broader economic and legal system for consideration and analysis.
To this end, Chapter One of the thesis provides background information of the research, research methods, and thesis framework, while Chapter Two summarizes basic concept and legal implication of the intermediary behaviors, explores legal characteristics of such behaviors and compares the similarities and differences between the intermediary and the brokerage in order to give a correct understanding on the origin of the intermediary behaviors. In fact, the market intermediary agencies started from the evolution of intermediary behaviors into the profit-oriented business practice. And along with the occurrence and accumulated development of market intermediary behaviors, the market intermediary agency would be inevitable needed.
Chapter Three of the thesis discusses the basic theory of the market intermediary. For example, why must the market intermediary behaviors be developed into an agent form? If we look at this from the outside, the intermediary activities are characterized with the individual, incidental and contingent nature, while the intermediary agencies have the feature of being a group, being fixed and specific. Therefore, the occurrence of intermediary agencies will inevitably lead to fundamental changes of the behavior in space and significance if comparing with the intermediary behaviors. If we make an analysis of such behavior from a deeper perspective, the transition from the intermediary behaviors to the intermediary agency itself is a consequence of the following market rules: (1) Dissemination of market information is limited and closed in scope and timeliness between specific subjects, while the intermediary behavior may effectively break through such limitation and thus expand the transactions possible. (2) In terms of the parties involved in the transaction, the presence of the intermediary service and agency can enhance its capacity to some extent as the relevant laws will provide the market participants with equal legal status. However, it is not necessarily the case for different market participants of equal legal status to possess the same capacity, which is closely associated with the subject‘s native congenital conditions, natural circumstances and postnatal opportunities. By contrast, the existence of intermediary agencies can remedy the problem of market participants in lacking the capacity to a certain extent. Along with the more and more sophisticated division of labor, the supplementary role of the intermediary agency is particularly evident in this regard. (3) The presence of the intermediary behaviors and agencies can reduce the time cost paid by both parties in the transaction so as to finish the deal within a shorter time. This will save parties‘ time and further accelerate the entire transaction process and thus improve the efficiency of economy operation.
In this context, the discussion on the definition and classification of intermediary agency as well as the relationship between the agencies and the government becomes more urgent and constructive in this chapter. Just like the occurrence of enterprises, the market intermediary agency originated from a single natural person, and is further developed into an enterprise in the form of partnership and other specialized company; such development reflects the evolution process of modern market economy from the birth, growth and maturity. The theoretical and institutional backgrounds of this process are mainly related to the relationship between the intermediary and the market and between the intermediary agency and the government‘s management. In other words, the modern market intermediary agency is situated in a position between the market and the government; it is beyond the characteristics of general market participants on the one hand, while on the other hand, it is different from the government agency‘s management and intervention in public affairs.
As the birth, operation and development of Chinese and foreign market intermediary agencies are affected by their own economic development models as well as historical and cultural traditions, Chapter Four will refer to the intermediary practices in the United States, Germany and Japan from a comparative perspectives. The author‘s analysis has clearly indicated that they share something in common, for example, the common market economy system and independent position of the intermediary agency as the market participant. In the meanwhile, there are some differences between these countries due to different national situations. In terms of the birth, development and existence of the market intermediary agency, China‘s situation differs greatly from that of major western countries mostly due to its transitional market economy in nature, such as the defective market access mechanism for the intermediary agency, the positioning deviation and poor independence of the intermediary agency, and incomplete management and regulatory systems of the intermediary agency. In addition, the external market competition, especially the pressure from the WTO and FTAs (including CEPA) has put the Chinese intermediary agencies in an embarrassing position. As a result, the Chinese policymakers and the intermediary agencies are facing similar difficulties in deciding whether they should deal with domestic or overseas problems at first or at the same time.
Chapter Five discusses such issues as the institutional types or forms, principles and procedures of establishing the intermediary agency from the perspective of designing the market access system. There are a number of reasons for the author to spend one chapter on this issue which is somewhat seemingly simple but in fact not true. First, against the macroscopic legal context, there are obvious omissions in the basic legal system on the market participants in China, as a uniform civil or commercial code is still absent. Although China has promulgate such concrete laws such as the Company Law of the People‘s Republic of China, Sole Proprietorship Enterprise Law of the People's Republic of China and Partnership Enterprise Law of the People‘s Republic of China, in order to make an overall institutional arrangement, it failed to provide adequate support in line with the operating characteristics of the market intermediary agency, as most of the agencies are included in various industries for centralized management. Moreover, the historical conditions and background of various market intermediary agencies in China are of great difference. For example, various intermediary agencies originated from the administrative organs, their independence, market operation as well as competition resources and conditions vary and fall behind that of the market intermediaries, and therefore they have a strong tendency of rent-seeking1. Furthermore, it is difficult to summarize types of market intermediary agencies from the legal perspective on the business operation due to their complexity and diversity. Therefore, it is particularly necessary to discuss this issue from the perspective of the establishment of market intermediary agencies.
Chapter Six further investigates and analyzes the internal and industrial self-regulatory mechanisms of the market intermediary agency, taking the intermediary agencies and the system in Hong Kong for example. The author identifies the core and key points of internal management of self-regulatory market intermediary agencies in her analysis. In her view, industrial associations of market intermediary agencies play an important role in the self-regulatory mechanism, through which the associations will not only help enterprises to build and form their own self-regulatory culture but also to assist the government to achieve the supervision over the market.
However, the industrial self-regulation can never replace the function of government‘s supervision and regulation. Therefore, Chapter Seven focuses on the supervision and regulation of the market intermediary agencies. The core issue is whether the government should regulate the market intermediary agencies, and how to regulate them if the answer is yes. The author argues that the government‘s regulation is of conditions, channels and limits; and at the same time, the government shall also set the goal of subject, marketization, standardization and professionalization of market intermediary agency and further improve its regulation on this basis.
The next chapter (Chapter Eight) discusses legal liabilities of the market intermediary agencies as an effective restriction mechanism and analyzes relevant issues on legal liabilities from the perspectives of public and private laws and relevant personal views. In the last chapter, the author shares her concluding remarks on the research of market intermediary agencies in China.
In short, the emergence of market intermediary behaviors and agencies has promoted the market transaction mode to a new realm: There is an evolution from the "transaction for the demand" to the "transaction for itself", and the demand creating the transaction is now a representative market mode. The market intermediary undoubtedly boosts and even benefits from this new field in mainland China. In this regard, the research on the role and position of the market intermediary agencies in the market economy system will help identifying the legal philosophy beyond the supply and demanding relationship in the modern market economy and legal system. Clearly, the market intermediary agency and its intermediary business activities have gone beyond the scope of medium and broker within the civil law sphere. The market intermediary agency will play a new and important market role in such emerging markets as the financial derivatives, high-tech products, online transaction, intellectual education and training as well as innovation of the traditional market. Against such a background, the author thinks that the legislators, law enforcers and researchers should pay attention to the problems of the intermediary agency from the legal perspective.
Last but not the least, this thesis will focus on issues of overall market intermediary agencies rather than the agencies in a particular industry simply because China faces a serious problem of lacking of a systemic regulation regime to deal with the emerging market intermediary agencies as a whole.

Date of Award	30 Jun 2016
Original language	English
Awarding Institution	City University of Hong Kong
Supervisor	Minkang GU (Supervisor)