The implication of China's open policy (kai-fang zhengce)2 3 in the past decade are best understood in the context of China's development strategy since 1976 and of the problems that led the Chinese to believe that the recent policy-shifts were necessary. In 1976, a new policy-open policy-w as emerging as a result of considerable controversy [cf. Section III.5]. As the Chinese themselves put it, the "historic turning point” for this open policy came in December 1978, at the Third Plenary Session of the Eleventh Central Committee of the Communist Party of China (CPC).1 Accordingly, China would be "actively expanding economic co-operation on terms of equality and mutual benefit with other countries" and would be "striving to adopt the world's advanced technologies and equipment".4 Indeed, the
2 The Chinese "kei-fang zhengce" cannot be translated as the open-door policy, not only because there is no word of "door" in the phrase, but also because the "open-door" is often to remind Chinese people ot the memory of this early century that western powers exploited China through the policy.
I
3 The policy-shifts can be summed up in the conclusions pointed in its communique. On the one hand, the state intended to give top priority to modernization of C hina-the Four Modernizations of agriculture, industry, defense, and science-technology, and terminate the large-scale nationwide mass movement "to expose and criticize Lin Biao and the Gang of Four". See The Communique o f the Third Plmery Session o f the 11th CPC Centrel Comnuttee on 22 Dec.. 1978, in Beijing Review (BR). 29/12/78. Vol. 52. No. 6. p. 16. 4 Ibid..
V. The PRC: Informal Sector and Legalization
open policy started to open a gateway to newly emerging economic and legal institutions in China from the late 1970s. However, similar to the structure o f Taiwan, the Party-State in the PRC has been still dominating the major economic activities. We shall analyse the con tradictions of the informal sector within the Chinese Party-State Socialism.
V.2.A "PARTY-STATE SOCIALISM": PENETRATION OF INFORMAL DOMAINS OF FOREIGN INVESTMENT
A common factor within the political structure between Taiwan and the PRC is the mechanism of the Party-State. Accordingly, several domains of informal sector has been existing actively under the ruling systems, the Party-State Capitalism in Taiwan, and the "Party-State Socialism" in the PRC. Only through this analysis that we can further understand the interaction between both formal and informal regulatory mechanism of for eign investment in a more explicit picture.
The institutional settings of the reform programme can be understood as expanding formal regulation from the development after 1978, including settings for political stabilization, for consolidation of the economy,5 and for cooperation with the west. These three dimensions of China's modernization explain the importance of both the institutional settings and the new legal system~as a political weapon to break with Maoist radical tradition, and as an economic vehicle to upgrade Chinese economic performance. However, the ceiling for both institutional and legal development is the informal ruling by the Party- State itself.
The phrase of "liang-tiao-tui-zou-lu" (walking on two legs) not only can describe the current interrelation between the socialism and the capitalism in China, the interaction between the state law and the Party norms ("zhengce"), between the formal law and informal sector, but also the role of foreign investment under the present Party zhengce. I
5 In lb* field of economic performance, two iicpe are baeic for the better arrangement of alructural changee: the reatructure of production itself which includes problems of bnlsnce relsting to inter-sectoral changes and intra-sec torsi changes; and the restructuring of administration. The restructuring of administration includes the re-organization of administration, the re-distribution of decision-malung, and the re-arrangement of the ownership system.
V. The PRC: Informal Sector and Legalization
Two famous Chinese legal scholars, Wang Shuwen and the late Zhang Youyu have analysed how two legs - the Party norms and the state law - can walk together:
"The written law of our state is a vehicle for putting into practice the political norms
("z h e n g c e The written law of our state is promulgated on the basis of the Party
political norms...As far as the enforcement of statutory law is concerned, one can comprehend the spirit and nature of the statutory law and use this instrument
("gongju'') correctly only if one understands and has a command of the Party political
norm s.... [Zhang & Wang (1980): 74-75]"
Thus, "the spirit o f the statutory law and political norms is identical", although the formal law is "not the only gongju (tool)" [Zhang & Wang, ibid.]:
"... Not only statutory law, but also "jueding" (resolutions) and "zhishi" (directives) by the Party, or "shelun" (editorials) in the Party press can express Party political norms [Zhang & Wang, ibid.]"
Unavoidably, the PRC's enacted laws of foreign investment only play the role of a vehicle for putting into practice Party norms, or Party policy, "zhengce”.
However, which Party line being prevailing will decide the future of these laws and foreign investment thereunder, because there have been always a duality of the Party line it self in the PRC's history [cf. Chapter III]. For instance, since 1979 there has been a duality norm under the open policy in the transformation of "Socialism with Chinese unique char acteristics", surnamed "zi" (capitalist) or surnamed "sher" (socialist) [xin-zi huo xin-sher]:
"The proportion of state planning or market is not the essential distinction between the socialism and the capitalism. Planning economy is not equal to the socialism, while the capitalism has state planning as well; nor is market economy equal to the capitalism... In short, in order to make the socialism relatively superior to the capitalism, we must absorb and utilize all civilized achievements in the human societies •• absorb and utilize every advanced managerial method and productive approach, which can reflect the productive rule in the modern societies, from all countries of the world, including those capitalist developed countries. [Zhong-fa (1992) No. 2 Document: 43-44]''«
These words above from Deng Xiao-ping in the Spring of 1992 have focused on the contradictions of duality of the Party zhengce: socialist (sher) or capitalist (zhi)7 Facing the strong "Anti-Bourgeois Liberalization" and "Anti-Western Peaceful Transformation" *
The Central Committee of the Chinese Communist Party, "Zhong-fa (¡992) No. 2 Document -- Summary of the Speeches by Comrade Deng Xiao-ping in Wuhan, Shengzhen, Zhuhai and Shanghai (18th January-21st February, 1992)" fated as Zhong-fa (1$92) No. 2 Document] has been delivered down to all Chinese organs at the county level on 28th February, 1992, in order to promote further holding the lines of open policy. A copy of the document was published in The Nineties (April, 1992), Hong Kong, pp. 42-47.
V. The PRC: Informal Sector and Legalization
movements from those conservatives in the Party after the 1989 Tiananmen massacre, Deng has to call for holding the open policy by himself again. Cannot the environment of foreign