How Zhejiang courts support its economy

zhejiang

My apologies to blog followers for my absence.  I will address Zhou Qiang’s comments on judicial independence in a later blogpost, for which I want to do some more detailed research than is possible at this time.

This blogpost will look at a less contentious question–what does the profile of civil and commercial disputes in Zhejiang province mean for the Zhejiang/Chinese economy and the role of the courts (in civil/commercial disputes).

Judge Zhang Hengzhu, head of the #2 civil division of the Zhejiang Higher People’s Court (High Court), spoke in early January at a conference organized by Tiantong & Partners, the boutique litigation law firm on civil and commercial disputes in his province.

What is special about Zhejiang?

The Zhejiang economy is dominated by small and medium enterprises (SMEs), many integrated with the global economy.  These companies are private, family-owned companies. Judge Zhang noted that these companies tend to have irregular corporate governance, with vague lines between property ownership by the company founder, the company, and affiliates.

Civil & commercial litigation in Zhejiang

Zhejiang (and Jiangsu) are the two most litigious provinces in China. The Zhejiang courts accepted over a million cases (1,112,900) in the first nine months of 2016, up 11% over 2015, of which over half (572,300) were civil and commercial cases, up 7% year on year.  [Comment–year-end numbers will be even higher.]

A significant proportion of those cases during that period were bad debt-related. About 17% of those cases (136,500) were private (shadow) lending disputes, involving total amounts in disputes of RMB 78.366 billion (almost USD 11.4 billion).  Private/shadow lending in Zhejiang is a supplement or replacement for bank financing. During the same period, about half as many financial disputes were accepted (85,400), up almost 20%, but the total amounts in dispute were RMB 232 billion, or USD 33.79 billion).  [Comment–year-end numbers will be even higher.]

How Zhejiang courts support SME economy

Judge Zhang commented on what the Zhejiang courts have been doing to support the province’s SME-dependent economy.  Those actions, which appear unusual those unused to the Chinese judicial system, include:

  • Taking the lead to generate judicial guidance on private (shadow) lending.  In 2009,  the High Court was the first to issue provincial level guidance. which it updated in 2013.
  • In 2013, it issued a concurrence (in the form of a meeting summary) with the provincial procuratorate and public security department on criminal law issues relating to collective fundraising.
  • The High Court is working with the provincial financial institutions on the disposal of non-performing assets.
  • It was one of the first provincial courts to take steps to generate judicial guidance on bankruptcy law and to take steps to deal with zombie enterprises (after raising it with the provincial Party secretary and government, who issued written instructions (批示)。
  • In late 2016, establishing a joint mechanism with fourteen departments of the provincial government to advance the use of bankruptcy and related issues, such as re-employment of workers, use of land formerly used by bankrupt enterprises, generating bankruptcy-favorable tax policies (document on the mechanism found here).

 

 

 

Supreme People’s Court Monitor’s 2015 year end report

images-2In 2015, the Supreme People’s Court Monitor had over 25,000 page views, from 140 countries (regions), primarily from:

  • United States;
  • Hong Kong;
  • Australia; and
  • Mainland China,

with the United Kingdom, Germany, and Singapore trailing closely. I am particularly honored to have so many visitors from China when WordPress blogs are often difficult to access there.  Visitors came from many of China’s neighbors (and all parts of greater China), including:

Macau, Taiwan, Philippines, Thailand, Laos, Cambodia, Vietnam, South Korea, Mongolia, Kazakhstan, Myanmar, Nepal, Pakistan, India, Bhutan, Russia,  Tajikistan.

Like my sister blog, China IPR, my followers include academics, students, journalists, government officials (and officials of international organizations) as well as practicing attorneys (in private practice, government service and with NGOs).  I am honored to have my blog listed as a Chinese law resource by Harvard and Yale Law Schools, Oxford Bodleian Library as well as many other universities.

I was honored to have been invited to speak about China’s judicial reforms by the Faculty of Law of the University of Hong Kong, University of Pennsylvania, Columbia Law School, and Guangzhou University, and the European China Law Studies Association, among other institutions.