As a law student, I am frequently asked “What does the law say about _______?” or “ I read once that the law says that______ should happen, but it didn’t in this case. Why?” And I am nearly always forced to say something along the lines of “it’s complicated” or “it depends on the facts of the case”. Many people do not understand that the law that is enforced is not merely what one statute or case says. Instead, it is a combination of a lot of things. Some of these things are even as simple as the local rules developed by judges and lawyers. While this lack of clarity does disappoint my friends and acquaintances, I think it’s important to remain honest about how the written law of a particular country is not always the same as the law that is actually enforced. This is as true in Common Law countries with their Case Law as it is in Civil Law countries with their Codes and Statues. This is even more important to remember when talking about China.
The People’s Republic of China is most similar to a Civil Law country. This means they do not use case law like the USA or the UK. Instead, they have statutes and codes that are interpreted by judges, but these interpretations are not necessarily binding. What makes China even more unique is that societal harmony is valued much more than the written law.
The Rule of Law is still a very recent development in China. For nearly all of its history, the law was something used to punish the everyday citizen. Instead, individuals followed Confucian values and attempted to keep harmony intact above all things. This means that taking someone to court because of a dispute is frowned upon in China due to it being disruptive to communal harmony. Instead, most people choose arbitration over the courts in order to resolve issues, because it is seen as keeping social harmony intact.
In addition, many Chinese judges choose to apply the law in a way that will benefit social harmony the most. This is especially true in bankruptcy cases. Let’s use the common enough example of a Chinese company owing money to a foreign company. While that foreign company expects the debt to be paid, even if the Chinese corporation has to declare bankruptcy and the debt paid out of seized assets, the Chinese courts typically take a different approach. From their point of view, the declaration of bankruptcy would cause a lot of people to lose their jobs. This would lead to some people not being able to support themselves and relying on the State instead. This means that, to the Chinese judge, it would be better for the debt to be paid in installments over a long period of time. This allows for a minimum of disruptions for a majority of people. Many foreign businesses are surprised at such a result because Chinese law does allow for a Chinese business to be forced to declare bankruptcy and have its assets seized to pay a debt. However, this almost never happens. In fact, it is so rare that it is a joke among Chinese lawyers that there is not really bankruptcy law in China.
But this just goes back to the beginning. There is a big difference, in all countries, between what the law is officially and what actually gets enforced. China is no different, but cultural and historic circumstances means that this is even more evident. My advice would be to consult with local attorneys, no matter where you are going. No matter if it is across the world or even just a neighboring State (or Province). This is because local rules typically vary and having an insider’s knowledge is an invaluable tool to have in order to achieve your goals.