Article eight of Chinese Administrative License Law requires the government to compensate private enterprises when it withdraws the administrative license because of legal transition. In most cases, the government is required to compensate enterprises for their actual investment. In a few cases, the court calculated the compensation based on the discounted value of expected future cash flows of the licensees’ assets. An empirical study finds that courts tend to offer weaker protection in cases where the legal transition involves environmental regulation, safety regulation, and regulation on energy efficiency. The courts offer stronger protection to the licensees in cases that involve zoning. Other factors, such as the licensee’s identity and the trial level, do not seem to affect the outcome. This article then assesses China’s approach from a theoretical perspective. The distinction between different types of legal transitions can be explained from the perspectives of promotion and deterrence of investment, fiscal illusion, and fairness. While current studies largely consider property protection as a necessary policy used to promote growth, this article considers property protection as a policy determined by the state’s growth strategies. China’s experience shows that in a developmental state, productive property might be more strongly protected than consumption property, which is very different from the property regime in a liberal state.

About the speaker: Prof. James Zeng

Register  here  by 10pm, 13 October 2020 to attend the event.