Undue Interference of Governments and the Dysfunctional Legal Regime for Safeguarding Investors in China

Abstract

The Chinese authorities always purport that they aim to purify the Chinese securities market and enhance the legal protection for investors, but the reality is bleak and disappointing. Confronted with the torrent of corporate scandals, legal scholars have already contributed abundant intellectual products on improving the investors’ protection in Chinese state-controlled listed companies. However, the majority of these contributions focus on the refinement of relevant legal institutions on safeguarding investors in Chinese law, or the transplantation of new ones from major commercial jurisdictions. Few of them pay attention to the link between undue government interference and the malfunction of existing investor-oriented mechanisms of the Chinese legal system. This article demonstrates that apart from legal defects, undue governmental interference which disrupts the functioning of investor-friendly legal institutions in place is another non-negligible factor, or even the most fundamental one in the context of China, to explain the porous investor protection in Chinese state-controlled listed companies. Therefore, in order to improve investor protection in Chinese statecontrolled listed companies, the political reform on the establishment of a public servant government, which has been underway in China must be continued. Chinese securities market, legal protection for investors, state-owned enterprises (SOEs), corporate governance framework; China, Government, Interference, Law, Investors.