From October 2016 to March 2017 the team is joined by Guest Kats Rosie Burbidge and Eibhlin Vardy, and by InternKats Verónica Rodríguez Arguijo, Tian Lu and Hayleigh Bosher.

Friday, 16 December 2016

Top-level Property Rights Protection Guideline released in China

China on Nov. 27 released a guideline on better protection of property rights -- the Opinions of the Central Committee of the Communist Party of China (CPC) and the State Council on improving the property rights protection (PRP) system and lawfully protecting property rights (中共中央、国务院关于完善产权保护制度依法保护产权的意见, see the Chinese full text here, and a general official report here) -- in an effort to shore up social confidence and promote social justice. Known as the first state-level guideline of property rights protection (PRP), this “centrally authorized top-level design” has attracted global attention.

*** Background ***

This InternKat, as a Chinese blogger, disagrees with some critiques mingled in overseas news saying “China is finally starting to correct the mistakes of PRP” -- merely information lag. In fact, China has been making great efforts to promote the reform of PRP for decades: from establishing the family-contract responsibility system in rural areas during the early stage of the Economic Reform (1978), till the shareholding-system reform in state-owned enterprises in the 90s; then “protection of private property” was written into the Constitution in 2004, later the Property Law of PRC became effective in 2007 -- by which China had preliminarily built up the PRP legal system. The 18th CPC National Congress (2012) led to the serial connotation-enriching of PRP, and most recently, “setting up modern PRP system” became a specific chapter in the 13th “Five-year Plan” (2016).

Yet, as the Opinion has pointed out, problems still exist. For instance, due to the lack of clarity between the owner and agent of the state-owned-property, losses of state assets caused by insider controls or intra-group transactions are still happening; abuses of public power to violate private property, in particular to illegally seal up, distrain and freeze private enterprises’ properties are occurring often; and the protection of intellectual property rights (IPR) is still weak, which has caused the easy, frequent occurrence of infringements. 

The Opinion aims to solve the above-mentioned problems. Further, it pledges to raise people’s sense of wealth security, boost social confidence, foster positive expectations and raise the impetus for entrepreneurship and innovation by various economic entities. Protection will also help social justice while maintaining healthy economic and social development.

The Opinion states clearly that “the essential strategy to strengthen the PRP is to comprehensively promote the Rule of Law” (instead of Rule of Men). In light of that, 10 tasks need to be carried out, amongst which “to reinforce the protection of IPR” is stressed as an important one. 

*** Zooming in the IPR section ***

4 sub-tasks are included in the IPR section:

1) Efforts should be made to step up punishment of IP infringement, and to raise the upper limit of infringement damage compensation. Punitive damages systems shall be explored and established; in severe circumstances, the compensation shall cover the reasonable expenses paid by the right holder to stop infringing -- the cost for infringement shall be raised. 

2) A mechanism that collects the information of counterfeit products’ sources shall be established. IP infringement shall be incorporated into credit records of enterprises and individuals, and the information-transparency in IP-related administrative punishment cases shall be further promoted. 

3) To improve the working mechanism of IPR trials, and to actively play the role of IP courts. Further, to intensify the “三审合一 (consolidate three traditional judicial procedures, namely civil, criminal, and administrative to one system)”, to enhance the connection between administrative enforcement and the criminal justice, and to step up the intensity of IPR judicial protection. 

4) To improve the enforcement mechanisms of foreign-related IP affairs, to strengthen the international cooperation of criminal law enforcements and the intensity of investigation. To severely punish unfair competitions, and to reinforce the protection of brands’ reputation. In addition, to combine the IPR protection with IPR utilization, in order to speed up the IP transfer and transformation. 

PPR (the umbrella) covers property rights, creditor's rights, stock rights and IPRs.
(Picture from Xinhua News)
*** Comments *** 

This Opinion shows a strong problem-solving orientation, though it may not directly provide concrete measures. It urges wide participation in the new stage of PRP, which involves legislation, law enforcement, judicature and law-abiding. To some crucial questions that Chinese people have been concerned and worried about for a long time (e.g. the “70-year-lease” rule of housing), it is now clear that finally the solutions in the near future can be officially expected.

Foreign investments are also beneficiaries of the new policy. The lack of PRP used to cause reluctance for them to plunge headlong into Chinese economic activities, when “Chinese characteristics policies” may ambush them unpredictably and sharply. 

As you may have noticed, the Opinion is neither a law (laws of PRP in China have existed for many years), nor a brand new slogan (you see lots of "strengthen" or "reinforce", instead of "create") -- yet, why does it still draw so much attention? And why does it seems to be such a big deal (actually, it really is …)? 

Well, it has everything to do with the enormously influential role which policy rather than law plays in China, in particular centrally-issued policy (from the Communist Party of China and the State Council). To be sure, Rule by Law is the ultimate pursuit of us all (and is the direction toward which China is heading), yet it does not necessarily lead to a purely negative judgement on the "policy-antecedent" style of governance. Take a look at the history of the PRC: many massively revolutionary developments were launched, pushed forward and led by central policies. Similar examples exist in foreign countries, for instance the “Nation Built on Intellectual Property Policy” appeared in Japan first (2002), and then the related legislation appeared subsequently. 

Governmental policy embodies and conveys certain values, and law is one of the many tools to attain the policy's stated and desired outcomes. Law should be stable and predictable, while the power of policy is often speedier, farther-reaching and in China has the most vast organizational foundation (all levels of governments). Given the fact that currently, most violations of private property happen at grassroots governmental levels, which to a large extent is a consequence of upper-regulation vacuum, this time the top-level issued restriction of the (excessive) administrative power is indeed a very valuable introspective step. Coordinated sets of measures will soon be introduced by all levels of government  -- a brand new era for PRP in China has officially started. 

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