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AbstractIt is widely accepted that law is essential for economic growth. Prominent economists in China have repeatedly called for strengthening the legal system so that the economy can continue to grow. Nevertheless, the fact that China has been able to achieve rapid economic growth while the law is weak seems to cast doubt on the significance of law. It is even suggested that China is a counter-example to the importance of law and, more provocatively, it is argued that China's economy grew rapidly not "in spite of," but "because of," weak law. To gain a richer and deeper understanding of law in China's economic growth, this paper conducts a case-study of China's stock market by examining its growth history and legal development. It is found that China has built from scratch a complex legal and regulatory system governing the stock market, which actually played a critical role in supporting the growth of the market. However, the trajectory of development was law following market growth, which was in turn caused by ideological and political liberalization. On the other hand, the market did not grow to its full potential and currently it faces serious challenges to fulfil the task of supporting the development of the economy, and the fundamental reason is political and ideological restrictions; likewise, the improvement of law for investor protection has not been sustained, for which similarly politics and ideologies offer an explanation. The experience of the stock market suggests that, while law is indispensable for sustaining China's economic growth, political and ideological liberalization is fundamental in that it is not only necessary to free up the economy so that it can continue to grow in the first place, but also crucial to further strengthening the whole legal system.

Having grown to one of the largest in the world in just over two decades, China's stock market is cited as a counterexample to the significance of law for financial market development. A thorough examination of the development of China's stock market, however, finds that law is actually critical to sustaining growth. On the other hand, the trajectory of development in China is growth first followed by law, and the improvement of law is caused by market growth. The experience of China suggests that law and market growth exhibit a bidirectional rather than unidirectional causal relationship, and the course of development is "growth-law-further growth." Nevertheless, this virtuous cycle is not a guarantee and market growth may not lead to stronger law in all instances, as evidenced by the fact that, although now better protected from market abuse, Chinese investors remain vulnerable to serious managerial misconduct at listed state-owned enterprises. Political and ideological constraints are the key obstacle. Politics and ideologies seem to be fundamental to stock market development, for they not only explain the stagnation of law in China despite market growth, but also, together with economic development, determine market growth, or lack thereof, in the first place. Furthermore, the strength of law in a country might not be predetermined by its legal origin, as law has improved in certain respects even in China—a country without the tradition of rule of law.

To evaluate the Chinese government's recent market‐orientated efforts to promote good corporate governance, this paper conducts a re‐examination of the working mechanics for market competition and other market‐based governance mechanisms to ensure good corporate governance. The finding is that the utility of market mechanisms may have been exaggerated. Not only are they not effective in disciplining serious managerial misbehaviour that offers managers more gain than loss, even their limited value to discourage such misbehaviour as managerial shirking is conditioned on that the opportunities for illegitimate enrichment by managers are few. On the contrary, legal sanction is fundamental to good corporate governance, because it is the only feasible way to combat such serious misbehaviour and curb illegitimate enrichment. Current experience of corporate governance in China conforms to this finding and poor corporate governance in China is better explained by the lack of credible legal deterrence. This being the case, the top priority for China is to strengthen legal sanction in order to rein in the excessive misappropriation and flagrant fraud. Only once this has been done will the efforts to implement market‐orientated reforms bear any significant fruits.

The place of the greenhouse-gas emissions trading within the global market system is studied. Multiple factors that render the creation of an emissions trading system a more promising approach to reducing global emissions than placing taxes on offending nations are identified, eg, emissions permits can be transferred to developing nations. The requirements for establishing an emissions trading system are then considered, eg, creating a body that monitors noncompliance & enforces penalties. The question of whether such a system is compatible with existing World Trade Organization (WTO) law is then addressed. Additional attention is dedicated to determining whether certain aspects of the emissions trading system, eg, determining how trading permits are allocated & initiating measures against nonmembers of the trading system, will cause conflict between parties that attempt to adhere to WTO law. The issue regarding whether a joint implementation approach can be used to make developing nations part of the trading system is also considered. Even though joint implementation could be used to found an emissions trading system, it is speculated that such a scheme will take several years to implement. 36 References. J. W. Parker

The Kyoto Protocol incorporates emissions trading, joint implementation and the clean development mechanism to help Annex I countries to meet their Kyoto targets at a lower overall cost. This paper aims to estimate the size of the potential market for all three flexibility mechanisms under the Kyoto Protocol over the first commitment period 2008-2012, both on the demand side and on the supply side. Based on the national communications from 35 Annex I countries, the paper first estimates the potential demand in the greenhouse gas offset market. Then, the paper provides a quantitative assessment of the implications of the EU proposal for concrete ceilings on the use of flexibility mechanisms for the division of abatement actions at home and abroad. Finally, using the 12-region's marginal abatement cost-based model, the paper estimates the contributions of three flexibility mechanisms to meet the total emissions reductions required of Annex I countries under the four trading scenarios respectively. Our results clearly demonstrate that the fewer the restrictions on trading the gains from trading are greater. The gains are unevenly distributed, however, with Annex I countries that have the highest autarkic marginal abatement costs tending to benefit the most. With respect to developing countries, their net gains are highest when trading in hot air is not allowed, and China and India account for about three-quarters of the total developing countries' exported permits to the Annex I regions.

The Kyoto Protocol is the first international environmental agreement that sets legally binding greenhouse gas emissions targets and timetables for Annex I countries. It incorporates emissions trading, joint implementation and the clean development mechanism. Because each of the Articles defining the three flexibility mechanisms carries wording that the use of the mechanism must be supplemental to domestic actions, the supplementarity provisions have been the focus of the international climate change negotiations subsequent to Kyoto. Whether the supplementarity clauses will be translated into a concrete ceiling, and if so, how should a concrete ceiling on the use of the three flexible mechanisms be defined remain to be determined. To date, the European Union (EU) has tabled a proposal for ceilings on the use of these flexibility mechanisms. Given the great policy relevance to the ongoing negotiations on the overall issues of flexibility mechanisms, this paper has provided a quantitative assessment of the implications of the EU ceilings with and without considering the however clause. Our results suggest that such ceilings are less restrictive to the EU than to the US and Japan in terms of levels of restriction on permits imports, and can prevent one third of the amount of hot air from entering the market. Our results also demonstrate that although the US and Japan are firmly opposed to such a restriction, they tend to benefit more from it than the EU which strongly advocates such ceilings, in terms of the reductions in the total abatement costs relative to the no trading case. Moreover, their gains can increase even further, provided that the however clause would operate as intended.