China Review International

Roman Tomasic notes at the very beginning of Company Law in East Asia that "Company law in many parts of Asia is currently undergoing considerable change." He cites four major factors (some of which are interrelated) for such change:

1. 1. some countries' laws have become outdated and are no longer appropriate to contemporary economic and political circumstances;

2. 2. international sources, such as multinational corporations, international financial institutions and professional groups are forcing reform;

3. 3. international or crossborder corporate law practice in the region encourages harmonization; and

4. 4. more streamlined bodies of company law may help lower business costs and achieve greater efficiency.

While the precise mix of factors influencing law reform differs from one country to another within the East Asian region, there are two major developments of general application. First, company law is playing a more important role [End Page 233] in corporate governance and corporate social control. Second, the regional financial crisis that began in mid-1997 focused attention on other topics in corporate law, such as corporate insolvency, conflicts of interest on the part of corporate controllers, and corporate borrowing and raising of capital.

All these developments make the publication of Company Law in East Asia very timely. Following the first two foundational chapters, the book consists of chapter-length summaries of the state of company law in fifteen countries in the region. These include the major East Asian economies (Japan, Korea, China, Hong Kong, and Taiwan), the ASEAN countries (Thailand, Malaysia, Indonesia, Singapore, the Philippines, Brunei, and Vietnam), and Australia, New Zealand, and Papua New Guinea. Most of the chapter authors are Australian academics, although several chapters (on Hong Kong, Thailand, Malaysia, and New Zealand) are each authored by a national of the country described, and many of the Australian authors worked with in-country academics or practitioners, who are identified.

The second chapter, "What Is Meant by 'the Rule of Law' in Asian Company Law Reform?" by David Campbell, is an especially good conceptual overview of evolving developments. It begins with the observation that "general commitment to capitalist economic development in Asia . . . requires the development of the legal framework necessary for capitalist enterprise, particularly company law, in countries within which the development of such a law has either remained vestigial or indeed has been actively opposed." Campbell attributes the "poor levels of rationality in decisionmaking and outright corruption" in the majority of the Asian polities to the fact that "the rule of law has not been, and continues not to be, a dominant feature."

While it seems obvious that inculcation of the rule of law is a prerequisite of economic development, accomplishing this is not so simple. First, conditions must be established "within which the technical resources of neoclassical economics can be brought to bear on the problems of Asian development." A restrictively technical policy-oriented focus on the need to adopt certain forms of company law overlooks "the necessity of the development of ethical institutions in countries without a developed capitalist economy." Culture and the broader sociopolitical environment within which laws evolve and are applied are important in this regard. Accordingly, Campbell argues that seeking to create a capitalist economy by merely focusing on the generation of the technical conditions for individual utility maximization is contradictory. "The creation of a market is equally, and more fundamentally, a moral issue, as a welfare-maximizing market creates the possibility of individual utility maximization only by limiting the scope of such maximization."

These observations provide an interesting backdrop against which to consider China's economic and legal reforms of the last twenty years. The reforms are a dynamic, ongoing process, and they have produced an impressive number of [End Page 234] laws and regulations in the areas of contract, property, and foreign-business relations, in addition to company law, aimed at supporting the transition toward a socialist market economy. The fact that their enforcement has been spotty should come as no surprise in view of the...