Book Review: Xiaoye Wang's The Evolution of China’s Anti-Monopoly Law

Apr 10 2016

Professor Xiaoye Wang became a member of the American Antitrust Institute’s (AAI's) Advisory Board in 2010. In the view of Australian professor Allan Fels, Professor Wang “has been the single most important figure in the creation of Chinese anti-monopoly law.”[1]

An American who pays attention to the world cannot help being interested in how a communist nation moved from party-controlled central planning to a market economy. To this reviewer, who is not an expert on Chinese antitrust, the most interesting part of the book is the substantial preface, which Professor Wang titles “My Anti-monopoly Law Research Path.” Most of this review is based on the preface.

Born in Hebei province and growing up in Inner Mongolia, Wang was about to graduate from high school in 1966 when China began the Cultural Revolution. She lived and worked in the countryside for three years. By the time she could begin higher education she was already 30 years old and the mother of two children.

When Prof. Wang graduated from the Faculty of Political Education at Inner Mongolia Normal University, she studied for and passed four legal professional examinations and was admitted to Renmin University as a Master’s student. At Renmin in 1984, she successfully defended her dissertation on “The Applicability of International Contract Law.”  She took a job at the Institute of Law, Chinese Academy of Social Sciences, which she says is China’s highest academic research institution, and where one can find her today.

In 1988, she worked on a doctoral thesis at the Max Planck Institute for Comparative Private Law in Hamburg, under its director, Professor Ernst-Joachim Mestmacker whom she describes as “the leading authority on antitrust law in Germany and Europe.” This experience brought her from researching private international law to researching a field of law that was foreign to Chinese people at the time.[2]

In 1993, Prof. Wang passed her oral exam for the doctorate degree at the University of Hamburg and her doctoral thesis, “Monopoly and Competition in the Chinese Economy—A Comparative Analysis of US and German Merger Control,” was published. She earned magna cum laude honors for the thesis.

Returning to Beijing in 1994, there were scholars who warned Prof. Wang that researching anti-monopoly law was “incompatible” with China’s national conditions. Fortunately, she says, China officials began drafting work for the Anti-Monopoly Law (“AML”) in 1994 and she was invited to participate in the drafting team.

The Preface traces through three stages of the drafting process, which I will not recount in any detail. Professor Wang participated in all three stages, though often from visiting scholar posts as far away as the U.S. and Germany. The first stage involved two drafts, in 1997 and 1998: “to a certain extent, a process of transplantation and learning from foreign laws.”[3] On the one hand, government officials visited countries with developed competition laws and policies; on the other, the drafting group itself consulted with foreign experts and government officials in preparing the draft. 

A consultation draft of the AML was circulated in 2000. At the end of 2001 when China acceded to the World Trade Organization, the pace of drafting quickened. The Ministry of Commerce (MOFCOM) took the lead and in 2004 submitted a draft to the State Council.

Thus began the second stage. Some opposition arose from Chinese civil law and commercial law scholars. The Contract Law, with the concept of freedom of contract, had just been promulgated and these experts believed that the AML might undermine that principle.  The advice of international experts, however, carried the day and there was even added a provision for the essential facilities doctrine, which Professor Wang believes was due to her efforts.[4] American experts raised strong objections to this provision, and it was eventually eliminated.

Another controversial issue at this stage was a provision regarding “the abuse of administrative power to eliminate or restrict competition.” Prof. Wang says she was shocked and disappointed when this key prohibition was dropped, but it was subsequently reinstated, reflecting that “the idea of fighting administrative monopolies was the mainstream view among Chinese businesses, academics, and government ministries.”[5] The State Council approved a draft.

The third stage of the drafting was review by the Standing Committee of the National People’s Congress (NPC) in 2006, where it had to go through three readings. Provisions were added and deleted. Three provisions were added that Professor Wang opposed on the ground that they were too close to industrial policy. In particular she wanted the law to more clearly apply equally to all state-owned enterprises, and that national lifeline industries should not be granted special protection. She credits her defeats at the Standing Committee “because the legislative process is, to a certain extent, an exercise of compromise and coordination of different views.”[6]  She goes on:

Some members of the Standing Committee thought that the Anti-Monopoly Law should reflect the characteristics of the primary stages of economic and social development of socialism in China and that national competition policy should be compatible with the socialist market economy.  Therefore, they believed that, due to China’s current stage of economic development, the Anti-Monopoly Law should prevent the overconcentration of enterprises to form monopolies and be conducive to domestic enterprises growing bigger and stronger through lawful mergers, developing economies of scale, increasing the degree of industrial concentration, and strengthening competitiveness….[Leaders of the Legislative Affairs Commission] cautioned me that I should not be too ‘bookish’ because the legislative process for the Anti-Monopoly Law would be even longer if it did not have these provisions with Chinese characteristics.[7]

The AML became effective on August 1, 2008.

The preface continues by summarizing points that Professor Wang stressed through the formulation and implementation of the AML. Here are a few:

My view is that transplanting a law is not simply moving or accepting an object but is a complex and lengthy process. It is the interaction and blending of a combination of political, economic, legal, cultural, social, and psychological factors.[8]

[W]hen the government is promoting business alliances or consolidation it must be careful to prevent businesses from becoming too big…The bundling of government and business is not conducive to improving the competitiveness of Chinese businesses.[9]

I think that China is transitioning from a planned economy to a market economy. And in actual economic life, restrictions on competition generally do not come from businesses but from the government. Therefore the Anti-Monopoly Law should proceed from the realities in China, and we should also be against government abuse of administrative power to restrict competition.[10]

 [J]urisdiction over the competition-restricting conduct of regulated industries should be given to the anti-monopoly enforcement authority.[11]    

Finally, and perhaps most importantly, Prof. Wang has stressed that the AML should have a unified, independent, and powerful enforcement authority…rather than the three antitrust enforcement agencies that currently share enforcement. [12] (The National Development and Reform Commission (NDRC) enforces the Price Law. The State Administration for Industry and Commerce (SAIC) enforces the Law Against Unfair Competition (i.e., non-price-related cases). And the Ministry of Commerce People’s Republic of China (MOFCOM) enforces the merger control laws.) She fears that the decentralized enforcement “will very easily be influenced by other government departments and changes in government industrial policy” and predicts that there will be a waste of enforcement resources and unavoidable conflicts of interest.[13]

Even though Article 9 of the AML provides for the establishment of a leading, organizing, and coordinating Anti-Monopoly Commission, Prof. Wang notes that the members will be non-experts who are mostly leaders of ministries that implement national industrial policy. She strongly favors merging the three anti-monopoly enforcement entities into one authority.

The preface describes Prof. Wang’s publishing and academic activities. She has published 18 books so far and more than 230 articles in Chinese, English, and German. The many academic activities she lists, I am gratified to note, include the AAI. She also gives special acknowledgement to former paramount leader Deng Xiaoping:

Not only did Deng Xiaoping lead China out of the Cultural Revolution lasting as long as 10 years, which had resulted in deep and broad political and economic crisis; through the opening of doors to schools again, he led China also out of the deep and broad educational crisis caused by the Cultural Revolution.[14]

One wishes Prof. Wang will one day write a book about the political and philosophical evolution which brought China’s leaders to want to remodel their economy on a capitalist basis. How in fact will a socialist market system differ from other market systems? Will the economic reforms lead to democratization and civil liberties, consistent with a model that in its liberal foundations was based on individualist rather than collectivist culture?

I have not attempted to describe the bulk of the book, which is a compilation of 14 essays that were originally published in Chinese and translated into English and 10 essays that were originally published in English.  For my purposes, there is too much repetition and perhaps too much of the material was written prior to enactment of the AML, although this was just as the publisher had requested, in order to fit into a series of republications of the works of other highly respected authors, including Richard Posner, F.M. Scherer, John Nash, Elinor Ostrom, Oliver Williamson, and Robert Solow, among others. The more contemporary essays toward the end of the book constitute especially valuable introductions to the AML and its early enforcement and challenges.[15] We look forward to a continuing flow of enlightening articles from this influential academic and astute observer as China’s experiment unfolds.

Author: Xiaoye Wang
Title: The Evolution of China’s Anti-Monopoly Law
Publisher: Edward Elgar (2014)
Pages: 445 (including forward by Allan Fells, appendix with the Anti-Monopoly Law and index)

[1] Allan Fels, Foreword, in Xiaoye Wang, The Evolution of China’s Anti-Monopoly Law vii (2014). Professor Fels is also a member of the AAI Advisory Board.

[2] Id., xiii.

[3] Id., xv.

[4] Id., xix.

[5] Id., xx-xxi.

[6] Id., xxiii.

[7] Id.

[8] Id., xxvii.

[9]  Id.

[10] Id., xxix.

[11] Id. xxx. A provision in the State Council’s draft that would have left enforcement to the relevant governmental department was dropped by the Standing Committee.

[12] Id., xxxi.

[13] Id.

[14] Id., xxxvii.

[15] If one could read only one chapter, other than the preface, I would recommend Chapter 20, Analysis and comment on China’s Anti-Monopoly Law, pp. 331-365, written in 2009.