The Real Deal and the Paper Deal: An Empirical Study of the Contractual Relationships between Chinese Commercial Banks and Their Customers

真實合同與紙面合同: 中國商業銀行與其客戶之間合同關係的實證研究

Student thesis: Doctoral Thesis

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Award date26 Jul 2019


To explain how Chinese commercial banks and their customers form and modify their contractual relationships, this dissertation suggests that standardised contracts are used to form contractual relationships, but their terms are not followed in the resolution of contractual disputes. The reasons for this are linked to the characteristics of the Chinese banking sector and Chinese commercial banks.

The state’s attitude and priorities determine the function of contracts and the choice of dispute resolution tools. This is because the Chinese banking sector, at least in the wealth management product (WMP) market, is operated pursuant to a ‘self-monitoring model’. The state is the ‘goalkeeper’ and the ‘striker.’ It has power over the applicable legislation and provides supervision, and it is also a participant in the market through its investments in commercial banks. Such a model has pros and cons.

On the one hand, a uniform banking sector limits the opportunities that customers have to choose different financial products and ‘shop for better terms.’ On the other hand, individual customers do not have to worry very much about their investments in financial products. Even if commercial banks default on their contract obligations, the significant role of the state in the market guarantees that individual customers will recover any losses from such contract defaults.

The findings and conclusions are drawn from an examination of the written contracts, an analysis of the decisions adjudicated regarding WMPs and observations regarding the out-of-court settlements in China’s banking sector. However, their implications extend beyond the original context. They could be reflected in any transaction that involves state-related companies as a party in the contractual relations. Moreover, this study provides a platform to reflect on the role of contract, the mechanisms for contract enforcement and how the law operates in a market where the dominant participants are state-related.