Contract Law and Financial Regulation in China: An Illegality Perspective

Abstract

The dynamics between Chinese contract law and regulatory legislation have most prominently played out in the past four decades in respect of the question of what counts as an illegal contract or a contract that is contrary to public policy. This article depicts the unique evolutionary trajectory of the Chinese law on illegality and public policy as applied to financial contracts and transactions. It demonstrates that until recently Chinese law had generally evolved towards insulating contractual freedom and uncertainty from the intrusion of financial regulation in particular and regulatory legislation in general. The recent elevation of financial regulation to become China’s foremost policy priority, however, has resulted in a reassessment of this approach. Financial regulatory rules have been re-characterised as embodiments of public policy. Consequently, Chinese contract law seems to have been mobilised as a tool to achieve national policy objectives. Notable though it is, this reassessment does not seem penetrating and all-encompassing.

Keywords: China, Contract Law, Financial Regulation, Illegality