The Role of Law in Chinese Value Chains

28 Pages Posted: 19 Jan 2021 Last revised: 15 Jun 2021

See all articles by Henry S. Gao

Henry S. Gao

Singapore Management University - Yong Pung How School of Law

Gregory Shaffer

University of California, Irvine School of Law

Date Written: January 19, 2021


Global Value Chains (GVCs) rely on division of labor within and beyond borders to minimize production costs and build regional and global value chains. Since starting its economic reform four decades ago, China has been highly successful in integrating its economy into regional and global value chains. This started with simple assembly and processing, then expanded to low-end labor-intensive manufacturing, and gradually moved up to technology-intensive and capital-intensive industries. Much has been written on global value chains and China, but little as regards their relation to law. Over time, China changed its laws and developed its legal system in ways that incentivized GVCs, including through attracting foreign investment, liberalizing its internal market, diversifying its exports, supporting the GVCs of foreign-based multinational companies, and (more recently) building outbound Chinese GVCs. This article analyzes the development of Chinese law, legal institutions, and international and transnational legal initiatives to support the development of GVCs, which we divide into five phases. The article does not idealize law in terms of “commitment” or “rule of law,” but rather, in the legal realist tradition, views law as an important, contributing factor in economic change. It presents law as a signaling and coordinative device that serves to channel private conduct for business planning and coordination. The article provides insights for understanding current developments in the trading system and their implications for regional and global value chains in a world fraught with trade conflicts and the undermining of international institutions.

Keywords: global value chains, design and production networks, china, Chinese law

Suggested Citation

Gao, Henry S. and Shaffer, Gregory C., The Role of Law in Chinese Value Chains (January 19, 2021). UC Irvine School of Law Research Paper No. 2021-05, Available at SSRN:

Henry S. Gao

Singapore Management University - Yong Pung How School of Law ( email )

55 Armenian Street
Singapore, 179943


Gregory C. Shaffer (Contact Author)

University of California, Irvine School of Law ( email )

401 E. Peltason Dr.
Ste. 1000
Irvine, CA 92612
United States

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