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Project Details
Funding Scheme : General Research Fund
Project Number : 457611
Project Title(English) : The Political Economy of Corporate Law Reform in China: The Rise and Decline of the UK-Style Mandatory Bid Rule as a Case Study 
Project Title(Chinese) : 政治經濟學視野下的中國公司法改革：以英式強制要約收購規則的興衰為例 
Principal Investigator(English) : Prof Xi, Chao 
Principal Investigator(Chinese) : 習超 
Department : Faculty of Law
Institution : The Chinese University of Hong Kong
E-mail Address : chaoxi@cuhk.edu.hk 
Tel : 39431142 
Co - Investigator(s) :
Panel : Humanities, Social Sciences
Subject Area : Professional & Vocational Subjects
Exercise Year : 2011 / 12
Fund Approved : 406,138
Project Status : Completed
Completion Date : 31-3-2014
Project Objectives :
To articulate the historical, political and economic contexts in which the UK-style MBR has operated and evolved in China;
To examine empirically the manner in which the relevant Chinese regulatory authorities, in particular, China Securities Regulatory Commission, have enforced and developed the MBR;
To identify the major players that have been affected by the operation of the MBR and articulate the way in whichs they have reacted to the MBR and sought to reform the MBR to their own advantage;
To explore a political economy understanding of the rise and decline of the UK-style MBR in China, in particular, and of China's corporate legal reform in general.
Abstract as per original application
(English/Chinese):		 This aim of this project is to explore the ways in which globalization, Chinese national policies and interests of local actors have interacted to determine the trajectory of corporate law reform in China. Traditionally, Chinese company law was largely the product of a small coterie of officials and legal scholars. Recent economic reforms and social transformations in China have, however, radically changed the political economy of corporate law. An array of state and non-state actors have competed to exert their influence on the evolution of China’s corporate legal rules and institutions, making the process of law reform in this area of economic life much more complex. The particular focus of this project is the adoption and adaptation of the UK-style mandatory bid rule (“MBR”) as a key component of China’s takeover regulatory regime. Under this rule, anyone purchasing a controlling stake (30%, for example) in a listed company must make an offer (the “mandatory bid”) for the remainder of the company’s shares. China adopted MBR from as early as 1993. The rule has been enforced, however, in a way that differs significantly from how it is enforced in the UK. In 2005, amidst the sweeping company and securities law reform in China, the UK-style MBR was substantially amended and, as a consequence, China’s existing takeover regime has deviated considerably from its UK archetype. The project will focus upon the various local actors in China, both state and non-state, whose interests are affected by the imported UK-style MBR, and analyze how their preferences have influenced the way in which the MBR is actually enforced and how it has recently been reformed. It is anticipated that the project will, based upon its systematic, empirical and comparative analysis of the rise and decline of the UK-style MBR in China, propose a more grounded theory for understanding how the forces of globalization, national economic policies and the preferences of local actors interact to shape the trajectory of corporate law reforms in China.
本項目旨在研究全球化進程、中國國家政策與地方利益主體三者之間的相互作用，如何影響和決定中國公司法改革進程。一直以來，中國公司法律很大程度上是由為數甚少的官員和法律學者所決定。然而，伴隨著中國近年的經濟改革和社會變遷，公司法的政治經濟維度正在發生顯著變革。諸多國家主體和社會主體都在試圖影響中國公司法律條文和制度的演進，從而使得公司相關的法律改革進程尤為錯綜複雜。 本項目重點研究中國公司並購規管法律中的一項重要制度，即移植自英國並不斷本土化的強制要約收購規則。該規則的含義是，任何收購人在收購上市公司控股股份（例如，30%的股份）後，必須發出要約（即強制要約），收購該上市公司所餘全部股份。早在1993年，中國就採納並制定了英式強制要約收購規則。但其在中國的實施情況與英國大相徑庭。2005年中國公司證券法改革，大幅度修訂了之前採用的英式強制要約收購規則。這使得中國現行的公司並購規管法律越來越迥異於英國相關法律制度。 本項目著力研究移植自英國的強制要約收購規則對中國諸多國家主體和社會主體的利益的影響，以及這些主體的利益偏好反作用於該規則在中國的實施和改革。本項目將從系統分析、實證研究和比較研究等多個視角，剖析英式強制要約收購規則在中國的興衰命運。並在此基礎上進行理論建構，試圖解釋全球化進程、國家經濟政策與地方主體利益偏好三者之間如何互為作用，並深刻影響中國公司法律改革進程。
Realisation of objectives: The four project objectives have been fully achieved. The ways in which these objectives have been achieved are summarized as follows: Objective 1: A comprehensive collection of primary and secondary materials has been compiled, documenting the legislative, regulatory, and policy discussions and debates that informed the evolution of the UK-style MBR in China. A large number of the documents in this collection are not publicly accessible, yet unclassified. Moreover, elite interviews have been conducted with (a) the CSRC’s current and former officials involved in the making the 2002 and/or the 2006 Takeover Measures; (b) officials in the Legislative Affairs Commission of the National People’s Congress Standing Committee involved in the enactment of the 2005 Securities Law; and (c) Chinese and overseas advisors to the Chinese legislators and regulators. These interviews offer a rare glimpse into the otherwise opaque process of rulemaking in China. Objective 2: The empirical investigation of the CSRC’s enforcement of the MBR has based on a unique, hand-collected dataset, which encompasses all publicly accessible CSRC’s MBR waiver decisions taken during the period between 1993 and 2010. The CSRC decisions often times, however, contain only limited information, thus falling short of providing adequate information that is crucial for the quantitative investigation. Steps have been taken to enrich the dataset to the extent that the research questions can adequately be addressed with solid quantitative data. First, a wide range of variables have been identified and defined in relation the underlying transactions pertaining to the CSRC decisions. Second, data on these identified variables have been hand-collected to the extent that they are publicly available. Third, a coding scheme has been designed and implemented for the applicable variables. Research assistants have been engaged to hand-collect and process the data. A rigorous process of “quality control” has been put in place to monitor data collection and processing to ensure its integrity and reliability. Objective 3: Elite interviews are the primary method of empirical investigation. Interviewees have included senior executives of the companies concerned, rank-and-file bureaucrats of the local state-owned assets supervision and administration agencies, as well as legal and financial professionals involved in the transactions concerned. Amongst the interviewees are also current and former CSRC officials tasked with enforcing the MBR rules. Objective 4: Conceptualization and generalization on the basis of the qualitative and quantitative findings have led to important theory development.
Summary of objectives addressed:
Objectives Addressed Percentage achieved
1.To articulate the historical, political and economic contexts in which the UK-style MBR has operated and evolved in China;Yes100%
2.To examine empirically the manner in which the relevant Chinese regulatory authorities, in particular, China Securities Regulatory Commission, have enforced and developed the MBR;Yes100%
3.To identify the major players that have been affected by the operation of the MBR and articulate the way in whichs they have reacted to the MBR and sought to reform the MBR to their own advantage; Yes100%
4.To explore a political economy understanding of the rise and decline of the UK-style MBR in China, in particular, and of China's corporate legal reform in general. Yes100%
Research Outcome
Major findings and research outcome: Empirical and theoretical findings of this project are significant with respect to a number of academic discourses. Given the space limitation, three aspects are highlighted as follows. First, this research challenges and develops a prevailing theory – the interest group politics theory – for understanding the varying evolutionary trajectories of national takeover laws. This research shows that the existing theory, alone, is limited in capturing in full the political economy dynamics in developing and emerging economies. It proposes that the existing theory be extended to take in account the state capitalist approach to economic development as adopted by many emerging economies, including China. In these economies, takeover regulation is sensitive to changes in national approaches to industrial transformation. “Obstructive” takeover rules are typically prone to legal changes in favor of more “takeover-friendly” rules, in the interest of achieving greater economies of scale and concentration, and trumping the powerful vested interests that opposed reforms. Second, this research enriches the emerging and growing literature on the political economy of corporate law in China. For instance, in the context of corporate takeovers, it empirically supports the hypotheses that the higher the level of government that ultimately controls the acquirers/sellers, the better the acquirers/sellers fared in securing the waiver of the MBR obligation, and that the regulator favors systematically state-owned enterprises over privately-owned firms. In the case of shareholder voting, this research empirically shows that China’s approach to cumulative voting has been shaped, on the whole, by the majority/controlling shareholders of the Chinese listed sector, who exert considerable influence on the Chinese lawmakers. Third, this research establishes the usefulness of the political economy approach to law in newer areas of corporate law. This research suggests that China’s increasing assertiveness in participating in re-shaping international banking legal order has been driven, in part, by the “private” institutional interests of China’s banking regulator. On a broader level, it highlights the need for one to look beyond the general rhetoric of the state actor’s interests and preferences, and to identify the underlying interests and incentives of domestic-level players that play an important role in shaping the higher, and more visible, interests and preferences of the national states. Findings of this research have been presented in 13 invited conference presentations and invited public lectures, and published with leading international refereed journals and prestigious academic presses. Further, two more articles are under review and to be submitted for review, respectively.
Potential for further development of the research
and the proposed course of action:		 This research has strong potential for further development in two respects. First, the quantitative approach taken by this research and the ensuing unique dataset lay a solid foundation for interdisciplinary collaboration with colleagues in other disciplines, in particular, in finance and accounting. I have already collaborated closely with Professor Shanmin Li of Sun Yat-Sen University, a nationally renowned professor of finance, and his team to develop findings of this research into a journal article currently under review by a top-rated economics journal. I have been co-mentoring a research student of his whose PhD dissertation will draw largely from the quantitative findings of this research. Second, the political economy approach to law adopted by this research has proven its utility in various subjects of the broadly defined corporate law, including takeover regulation, shareholder voting, as well as financial law. I intend to further extend the application of this powerful analytical tool to other related areas of law and, where appropriate, develop them into new GRF proposals.
Layman's Summary of
Completion Report:		 Traditionally, company law in China was largely the product of a small coterie of officials and legal scholars. Recent economic reforms and social transformations in China have, however, radically changed the political economy of corporate law. An array of state and, gradually, non-state actors have competed to exert their influence on the evolution of China’s corporate legal framework. The recent company law reforms present a rare glimpse into the dynamics of commercial legal changes in China. The existing literature has yet to address an important issue: what are the forces that have shaped the evolution of corporate legal rules in China, and in what way have they done so? This research presents an empirical-based political economy assessment of the above issue by looking into the complex dynamics between the forces of globalization, Chinese national economic policies, and diversifying interests of local actors, and their influence on the making and enforcement of corporate rules in China. It contributes to a number of important discourses and debates in corporate law and comparative law, and in related disciplines. Its empirical and theoretical findings also inform the ongoing policy debates on corporate law reforms in China and beyond.
Research Output
Peer-reviewed journal publication(s)
arising directly from this research project :
(* denotes the corresponding author)
Year of
Publication		 Author(s) Title and Journal/Book Accessible from Institution Repository
Chao Xi*  "The Political Economy of Takeover Regulation: What Does the Mandatory Bid Rule in China Tell Us?", Journal of Business Law  No 
2014 Chao Xi*  "Domestic Politics as International Norms: China’s Changing Roles in International Banking Regulation" (2014) 30 Banking and Finance Law Review 69-88  No 
2014 Chao Xi*  "The Political Economy of Cumulative Voting: The Case of China" (2014) 14 The Asian Business Lawyer 1-20  No 
Chao Xi*  "Why Has Basel III Become Hard Law for China? The Domestic Political Economy of International Financial Law" in Ross Buckley, Douglas Arner and Avgouleas Emilios (eds), Rethinking Global Finance and Its Regulation (Cambridge University Press, forthcoming).  No 
Shanmin Li*, Ziqiang Wan, Chao Xi*, and Xinxiang Shi  "Nature of Ownership, Corporate Takeovers, and the Political Economy: Evidence from Regulatory Waivers of Mandatory Bid Obligations in China"  No 
Recognized international conference(s)
in which paper(s) related to this research
project was/were delivered :
Month/Year/City Title Conference Name
April-May/2012/Bangalore, India In the Shadow of the City of London: Evolution of the Mandatory Bid Rule in China and Japan  First Annual Conference on “Competition and Financial Regulation: Contemporary and Comparative Issues”, organized by the National Law School of India University, in association with the Institute for Law & Economics, University of Hamburg; Law Faculty, University of Wisconsin-Madison; Dedman School of Law, Southern Methodist University; Georg August University, Gottingen. 
September/2012/Cambridge, UK Deregulating the Market for Corporate Control: The Decline of the Mandatory Bid Rule in China and Its Implications for Europe  4th Cambridge International Regulation and Governance Conference on “More Regulation or Better Stewardship? Optimizing the Means and Ends of Good Governance”, jointly organized by the University of Cambridge and Anglia Ruskin University 
December/2012/Kuala Lumpur, Malaysia Law and Industrial Transformation: Evolution of Corporate Takeover Regulation in China and Japan  "China-India Conference", jointly organized by the University of Malaya, University of Hyderabad and the CUHK Hong Kong Institute of Asia-Pacific Studies 
June/2012/Cologne, Germany Between State and Market: Corporate Takeover Regulation in China  Inaugural Lecture of the East Asian Seminars, University of Cologne, Germany 
March/2013/Shanghai, China Developmental State and the Evolution of Takeover Laws: The Case of China  Third East Asian Law & Society Conference, organized by the Shanghai Jiao Tong University KoGuan Law School 
April/2013/Hong Kong SAR The Mandatory Bid Rule in China: A Political Economy Approach  Round Table on "Corporate Governance: Developments in Mainland China, Taiwan and Hong Kong" organized by the HKU Faculty of Law 
June/2013/ Taipei, Taiwan The Political Economy of Takeover Laws: China’s Evolving Regulation of Partial Takeovers as A Case  Symposium on "International Trade, Technology and Business Law", organized by Institute of the Technology Law at National Chiao Tung University 
May/2013/Guangzhou, China The Political Economy of Corporate Takeover Laws: A Cross-Country Comparison between China, the UK and the US - Implications for Theoretical Construct  Fajing Public Lecture Series of Sun Yat-Sen University Law School 
June/2013/ Beijing, China The China Model? Toward a Developmental State Approach to Comparative Takeover Laws  International Conference on "Comparative Law in the Globalized World: Transmigration and Innovation", jointly organized by Cornell Law School and Tsinghua University Law School 
September/2013/Oxford, United Kingdom The China Model? – Toward a Developmental State Approach to Comparative Takeover Regulation  International Conference on ‘New Approaches and New Questions in Chinese Law’, jointly organized by the University of Oxford and the European China Law Studies Association 
May/2013/Cologne, Germany Who Writes (and Re-writes) Law in China: The Political Economy of Corporate Takeover Regulation  Invited Lecture at the East Asian Seminars, University of Cologne 
04/2014/Shanghai, China The Political Economy of Corporate Takeover Laws: The Comparative Approach and Theory Development  Invited Lecture at the Shanghai Jiao’Tong University KoGuan Law School 
July/2015/ Singapore The Political Economy of Takeover Regulation: Toward a Comparative Theory (Featured Speaker)  International Conference on "Comparative Takeover Regulation: International and Asian Perspectives", organized by the Faculty of Law at National University of Singapore (NUS) and the School of Law, Singapore Management University (SMU) 
June/2014/Shanghai, China Domestic Politics as International Norms: Basel in China  First Duke-SJTU Financial Law Forum, jointly organized by Duke University Law School and Shanghai Jiao Tong University Koguan Law School 
Other impact
(e.g. award of patents or prizes,
collaboration with other research institutions,
technology transfer, etc.):		 I have collaborated closely with Professor Shanmin Li of Sun Yat-Sen University, a nationally renowned professor of finance, and his team to develop findings of this research into a journal article currently under review by a top-rated economics journal. I have been co-mentoring a research student of his whose PhD dissertation will draw largely from the quantitative findings of this research.
  SCREEN ID: SCRRM00542