Chinese economic development, rule of law, and the internet

Chinese Economic Development, the Internet

Rule of Law, and

Henry H. Perritt, Jr.* Randolph R. Clarke

Tbe Internet and its World Wide Web (Web) have an important role to play in the economic development of China. The government of the People’s Republic of China has declared its intention to open opportunities for foreign trade and investment in China. Part of the commitment is a commitment to rule of law. Rule of law acceptable to commercial interests requires transparency and decisional rationality. These two features can be realized most quickly by connecting legal institutions through the Internet’s Web to bodies of international commercial law, thus creating a virtual library for Chinese legal decision makers, and using the Web as a quick and cheap electronic “printing press” for Chinese legal decision makers. As a result, their statutes, rules, and decisional law become available to commercial interests. But technology is not enough. Innovative cross-cultural exchange programs aimed at the legal, managerial, and Webmaster professions will round out this rule of law support for commercial globalization.

CHINA’S IMPORTANCE Economically Over the past decade, China has committed itself to an economic strategy that will succeed only through intensified integration with the world economy.’ China has reversed its policy of autarky with minimal foreign trade, to one encouraging extensive foreign trade and investment. Through allowing foreign trade and investment, China has rushed into the global economic community. In 1995, China was second only to the United States in total amount of direct foreign investment. Though extensive manufacturing capability has * Direct all correspondence to: Henry H. Per&t, Jr., Dean & Professor of Law, Chicago-Kent College of Law, Illinois Institute of Technology, 56.5 W. Adams Street, Chicago, Illinois 60661-3691
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developed in China, China does not have the ability to produce its own manufacturing equipment, and remains dependent on continued foreign investment to keep its economy running.2 China’s tremendous population is an independent source of global economic power. A shift in China’s production and consumption, or lack thereof, would significantly affect the balance of international trade. As China’s economic development continues, the Chinese people enjoy higher standards of living, and become increasingly demanding consumers. The emerging Chinese marketplace will shape the economic landscape during the next several decades. Legal Culture Law making, legal practice, and legal education in China all aim at preparing the Chinese legal system to deal with a market-based economy. The requirements of a market based economy are vastly different from the conditions from which the pre- 1980 legal system in China emerged. The Chinese constitution was amended in 1982 so that it would both carry forward many of China’s legal traditions, and make provisions for governing and protecting foreign investment in China. Since that time the Chinese leadership has made a priority of bringing China’s commercial legal system in line with international practices. Due to lack of experience dealing with market economies, the Chinese legal system is adopting international practices, and drawing on foreign legislative experience to draft intellectual property and patent laws. The Chinese leadership realizes that implementation of the laws created to foster a market driven economy will bring about significant change in Chinese judicial practice. Substantial judicial education and training will be required before new laws can take effect. Chinese president Jiang Zemin has asked for international help with the judicial education and training that China requires. At the end of 1996 there were 90,000 lawyers, and 7,200 law firms in China. Also, at the same time there were 117,000 candidates sitting for the Chinese lawyer certificate exam.3 Symbol of Resistance

to Internet

Until recently, China was perceived by the West as being hostile to the Internet. Internet use in China was limited by requirements for individual licenses, and requirements that all Internet traffic be routed through a limited number of firewalls to screen out material deemed politically harmful by the central govemment.4 Now, as other sections of this article explain, China recognizes the Internet’s utility as an electronic marketplace and a channel for essential business information, and is emphasizing the need to build an information superhighway of adequate size. Politically With the collapse of the Soviet Union, China’s role in world politics has been redefined. China no longer enjoys automatic support of one of two superpowers as a counterbalance against the other. Instead, China must project her own importance as a player in global politics.

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In order to grow into an economic superpower, China will have to accept a certain amount of interdependence with the global economic markets. This interdependence will broaden the range of issues that China considers to be national interests. Interdependence will also cause Chinese economic forces to affect the world market. The widening of China’s interests, and growth of economic influence promise significantly to increase China’s need for, and use of, political power. China’s entrance into the global marketplace allows for Chinese economic activity to affect world markets. China’s ability to control this effect is a powerful political tool that it is only now learning how to use. As China becomes more adept at using economic power as a political tool, international organizations such as the United Nations (UN) and the World Trade Organization (WTO) will have to account for China’s interests. These organizations will have to include China as an equal in order to subject her to their regulations. Inclusion as an equal, however, is a two-way street that will enable China to take part in setting the policy of these organizations, rather than just complying with it. This inclusion will serve to extend China’s growing political influence further. Though China wields significant influence in the UN as a Permanent Security Council member, lack of overlap between UN interests and Chinese national interests leads to frequent Chinese abstention from Security Council votes. China’s policy of abstention is rooted in the ideology of peaceful co-existence and absolute sovereignty that forms the basis for much of Chinese foreign policy.5 These principles, often expressed when dealing with situations in regions far from China, generally defer to national interests when China is dealing with domestic issues, or foreign policy that touches its borders. As China’s national interests expand, these interests will influence a wider range of foreign policy decisions. Chinese styles of decision making will become important in international organizations as China seeks and exercises greater influence.

SUMMARY OF LOGIC China’s irreversible commitment to economic expansion6 and recent political activity suggest preparations to assume the role of a global economic superpower in the near future. In order for any country to do business in the international marketplace, commercial and legal policy in that country must be governed by a rule of law. Governance by rule of law ensures that the rules of a commercial and legal environment are transparent, and are applied consistently. These conditions, consistency and transparency, allow a marketplace to be stable and predictable-preconditions for foreign investment. The process of transition to consistent rule of law in a commercial environment can be hastened by using the Internet to distribute legal information, and to link judges electronically. Publishing information on the Internet eliminates time and cost barriers associated with paper based distribution. When legal information is distributed over the Internet, it is instantly available to anyone who wishes to see it. All parties in a business arrangement, including legal decision makers, can become familiar with the laws and regulations that will affect them without having to travel to distant courts or countries. Legal decision makers are enabled to consult virtual law libraries instantly, and to confer with colleagues and

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experts to ensure consistent application of laws. Electronic distribution of legal information rapidly creates a level playing field for commercial activity governed by rule of law. As China streamlines its troubled state-owned enterprises, displaced workers will depend on work created by foreign investment. Achieving economic growth similar to past years will require a greater dependence than ever before on foreign investment. China’s growing dependence on foreign investment for domestic economic growth requires provision of favorable conditions for foreign investment as quickly as possible. China’s leadership acknowledges this need and has asked for assistance specifically in the areas of rule of law and judicial reform7 Since the fastest way to create rule of law in the Chinese commercial environment is to use the Internet, and China’s need for foreign investment requires rule of law as quickly as possible, China needs to use the Internet to effect rule of law, which will encourage and enable foreign investment.

APPROACH This article reviews the logic of an open Internet for China, proceeding from China’s commitment to expanded trade and investment, to the proposition that a rule of law is necessary for realizing the full potential for expanded trade and investment, to the proposition that the Internet is a particularly effective way to accelerate rule of law, when supplemented with appropriate professional education and independence, resulting in the conclusion that linking Chinese legal institutions through the Internet is an essential part of a strategy to increase economic development. The article explains how transparency and decisional rationality - the two hallmarks of a rule of law-relate to the virtual library and electronic publishing functions of the Internet’s World Wide Web. While not sufficient by itself to establish a rule of law, the Internet is the quickest and cheapest way to provide for the basic ingredients of process transparency and decisional rationality. In addition, judicial independence and training are necessary as is an independent bar, familiar with Western as well as Chinese legal traditions and with international commercial law standards. Together, these elements can build institutional mechanisms to provide predictable dispute resolution, backed up by enforceable judgments and a critical mass of substantive law reflecting universal commercial practices and fair procedure. The article explains that the Internet must be open to serve its electronic publishing and virtual library functions. Information providers and consumers must be able to take advantage of the Internet’s distributed architecture to reduce costs. Rule of law presupposes freedom of information and no monopolies over public information, preconditions for the desirable diversity of sources in channels for basic legal information and for marginal cost pricing. The article describes the status of China’s current information infrastructure by using the familiar OS1 stack as a model for, not only the elements of an electronic network, but also for the elements of information value that serve the needs of businesses and their advisors. The article concludes by identifying the steps necessary to build a legal infrastructure based on the Internet.

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LOGIC OF AN OPEN INTERNET FOR CHINA China Is Committed to Expand Trade and Investment China has experienced substantial economic growth in foreign trade and investment since1992. China’s gross domestic product (GDP) growth rate has jumped from 3.9% in 1990, and 8% in 1991, to over 13% in 1992 and 1993. The average annual growth in GDP was 11.8% for the period of 1992 to 1996.* China’s share of the world export market has grown by an average rate of 12.4% annually from 1989 to 1995. China’s export level of $80.5 billion in 1992 grew to $153 billion in 1996. Chinese per capita income has risen 6.9% annually from 1980 to 1995. 9 Since being welcomed into China, foreign business interests have generated significant economic growth. While this growth has been very beneficial to China in terms of standards of living, and infrastructure development, continued growth is not inevitable. China backed away from economic opening in 1986, and again in 1988, due to high inflation and perceived loss of “cultural and ideological discipline.“” Continued economic growth depends on the Chinese leadership remaining committed to openness and expansion. At the same time, expansion through foreign investment is becoming a political and economic necessity for China. Many Chinese depend on comprehensive cradle-to-grave benefits tied to employment in state-owned enterprises. As part of a plan for economic reform, China is taking steps to privatize its state-owned enterprise sector, a move that will increase production, but will also cause millions of workers to lose their jobs and related benefits. These displaced workers are migrating to large cities to find new employment. China is counting on economic growth fueled by foreign investment to employ labor displaced by state-owned enterprise reform. Lack of economic expansion will decrease the opportunities available to displaced workers, leading to increasing unemployment rates and political unrest. Trouble with failing state-owned enterprises has hurt the Chinese banking industry. China’s four state-owned banks have run up an estimated $360 million in unrecoverable debts, approximately 20 percent of their total loans, supporting state-owned enterprises.’ ’ China’s economy needs the continued strength generated by foreign investments to absorb damage caused by overextended banks. While economic expansion is crucial to relieving employment and banking problems, it is also necessary to support security expenditures to keep China independent from foreign powers. China’s military is long on manpower, but remains short on modem technology. Development and deployment of military technology is possible only when strong economic conditions exist. China’s current path to a strong economy depends on expanded economic opening and trade. In an October 1997 meeting, China’s leader, Jiang Zemin, told U.S. Treasury Secretary Robert Rubin that his commitment to continuing China’s economic development was irreversible. l2 China’s leadership appears to have realized that China has advanced economically beyond the possibility of retrenchment to autarky. Such a retrenchment would freeze the current economic growth driven by foreign investment, and expose the growing needs and expectations of China’s population to the inadequacies of China’s internal commercial and financial systems.

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Rule of Law Is a Prerequisite for Sustained Growth in Trade and f nvestment As a part of a commitment to allowing foreign trade and investment, China must provide conditions in which investment can flourish in order to make investing in China attractive. A major step toward providing these conditions will be judicial and other legal-system reform with the goal of establishing rule of law in China’s commercial legal system. Rule of law is necessary in order to establish a level playing field for commercial activity. In a legal environment ruled by law, judges are not free to create or ignore law. Instead, they are limited to interpreting and applying existing norms. For rule of law to be effective, regulations must remain stable through changes in judges and national leadership. These requirements ensure the predictability and stability of a body of law. Companies wishing to make investments are able to learn the laws that will apply to their commercial activities, and be reasonably confident that the laws will not change. Stability and predictability of legal conditions affecting business are prerequisites for investment. Because rule of law brings about conditions of stability and predictability, it becomes a prerequisite for businesses to be comfortable making investments. China’s leadership is aware that because rule of law is a prerequisite to investment, advances in rule of law will translate directly into increased investment. Chinese President Jiang Zemin agreed during the November 1997 U.S. - China Summit to work in cooperation with the United States to provide training to judges and lawyers to promote rule of law.”

Infrastructure Is Infrastructure The focus of this article is on channels for making basic legal information available. It is important to understand that the technological infrast~cture built for legal information also is available for purely commercial information. Thus, not only will an open Internet enhance rule of law, thereby enhancing commercial development; it also makes it easier to obtain information about commercial agents and suppliers, and to solicit business.

Rule of Law Requirements While there is some controversy over what “rule of law” means, most practical intemational relations discussions assume that it means procedural transparency and decisional rationality - the two norms of the “legal process” school of jurisprudence.t4 Transparency. Transparency is a procedural concept that contemplates open access to decision making. Transparency in decision making requires that procedural rules be specified and be available to the public. It requires the basic elements of procedural due process: l

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A neutral decision maker; Disclosure of the legal and factual basis asserted by the parties to a disputer An opportunity to present reasons in support of one’s position; An opportunity to present witness and to cross examine opposing witnesses; A public proceeding to evaluate evidence; A decision based only on evidence and legal arguments officially on the record;

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Reasons given by the decision maker in support of the decision: An oppo~unity for appellate review.

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These aspects of procedural due process and transparency are reflected in American civil and criminal procedure, and a wide variety of procedural systems satisfy these basic requirements, including many different administrative agency approaches in the United States, and including procedures based on civil law as well as those based on the common law.15 An essential aspect of transp~ency of legal systems is publication of legal decisionsi “Published decisions with precedential value provide guidance to individuals about the nature of the law and how to modify their behavior accordingly, thus improving the ability of individuals to order their economic affairs efficiently.“17 Moreover, published judicial decisions permit the public and other governmental officials to monitor adherence by the judiciary to the norms of decisional rationality, and to the mandates of superior legal institutions. One commentator has noted that only the Supreme People’s Court in China publishes cases, and that there is some debate about whether those cases carry the force of precedent.”

Decisional Rationality. The decisional rationality requirement of rule of law means that decisions must be rationally related to substantive principles known in advance. The “known in advance” element of this description obviously overlaps with procedural transparency. Decisional rationality means that the principles guiding a particular decision must be those reflected in published norms and precedents, including constitutions, statutes, administrative agency rules, and previous decisions. It also means that the relationship between the decision in a particular case and these pre-existing rules-of-decision must be logical. Deviations from previous decisions must be explained and rationally justified. This process of explanation and linkage to precedent is possible only if a body of precedent is widely available to the drafters of new decisions, and to legal professionals and the public who scrutinize the persuasiveness of the explanations for new decisions. The Two Pre-requisites of Rule of Law Relate to the Virtual library and Electronic Publishing Functions of the Internet’s World Wide Web Procedural transparency and decisional rationality are closely related to two functions performed by the Internet’s World Wide Web. The Web can be a virtual library and a cheap printing press. The virtual library function enables decision makers, disputants, and their counsel to obtain ready access to procedural rules, and to the ~onsti~tions, statutes, and case decisions guiding decision making. The virtual library function includes a virtual docket function to permit participants in a particular dispute to have easy access to the schedule for filing materials, for holding hearings, and for making decisions, as well as access to materials filed by other parties and to draft decisions. The electronic publishing function means that decision making institutions and disputants easily can add their materials to the virtual library making these materials readily

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accessible to everyone else. Electronic that is necessary is for the author of a cessing program in a particular format local area network machine connected publicly as soon as it is written.

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publishing through the Web is cheap and quick. Ail document to save it in his or her ordinary word proand then to transfer it to a particular directory on a to the Internet. A document can be made available

While Neither Necessary nor Sufficient to Establish a Rule of law, the Internet Is the Quickest and Cheapest Way to Provide for the Basic Ingredients of Process Transparency and Decisional Rationality Process transparency and decisional rationality can be obtained without resort to the Internet, or indeed without resort to any information technology. The underlying concepts were developed even before the printing press, when the judicial traditions in the West were largely oral. Nevertheless, providing for electronic publishing and access to legal materials through the Internet’s World Wide Web are quicker than performing the same functions through ink on paper artifacts, are much cheaper for both publishing and user institutions, and essentially eliminate the constraints of geography. Procedural rules or a major decision published on the Internet are as accessible by someone in Sarajevo or Syracuse as in Shanghai. Technology is not enough, however. Rule of law also requires an independent judiciary, an independent bar, a willingness by the executive function of government to enforce judicial decisions against recalcitrant respondents, and a commitment to freedom of access to official information.

Judicial Independence and Training. The judiciary must have sufficient employment security to be free of coercive pressures from government or party---or, for that matter, the general public-to decide cases in particular ways. They must be compensated sufficiently to reduce the temptation for them to accept bribes. They must be trained and socialized to professional norms. thus encouraging them psychologically to uphold the rule of law tradition. Among the problems with the traditional legal system in China is the phenomenon of “government above the law.” I9 Deng Xaio Ping is quoted as saying, “to ensure people’s democracy, we must strengthen our legal system. Democracy has to be institutionalized and written into law, to make sure that institutions and laws do not change whenever the leadership changes or whenever leaders change their views or shift the focus of their attention.“*” This commitment and the Chinese response have encouraged many scholars to believe that China has already entered the realm of rule of law.2’ Judicial training is a problem, however. “Aside from being relatively few in number, judges in China often have relatively little legal education.“** An important aspect of reform is to staff specialized economic courts with judicial personnel trained on an accelerated schedule concerning the details of the foreign economic commerce act and the principles of the rule of law.‘” Judicial reform is a hot topic in China. It was one of the points in the October 29, 1997, Joint Statement.

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Independent Bar. In anything but the most primitive legal systems, litigants need counsel to help them deal with procedures and to make the most effective arguments based on pre-existing law. The availability of such counsel requires a bar that is independent of governmental or party pressures, in the sense that a member of the bar must be free to represent an unpopular party without fear of economic disaster or criminal prosecution. The bar also must be trained and professionally socialized to honor a system of professional responsibility that requires zealous advocacy, maintenance of client confidences, and avoidance of conflicts of interest. “Despite having a population of over one billion, the PRC [The People’s Republic of China] has only about 380,000 legal personnel, leading to long delays in bringing legal action.“24 The number of attorneys in the PRC has been reported to have grown from about 3,000 in 1980 to 44,000 in 1989, to about 100,000 in the mid-1990s.25 Beijing is reported to have set a goal of 150,000 lawyers by the turn of the century and 300,000 by 2010.26 Enforceable Judgments. None of the other attributes of a rule of law do any good if judicial decisions are unenforceable. If someone reneges on a contract, the victim does not care how fair the judge is if the reneging party cannot be made to pay. In some systems, court systems control their own enforcement personnel. An American sheriff and the Bosnian judicial police are examples. Even when this is the case, however, the executive branch of government is likely to have a monopoly on larger scale coercive power. The judicial enforcement officer needs to rely on this executive power, and certainly cannot do his job if the executive power is deployed to resist judicial enforcement. Even arbitration systems ultimately depend on enforcement of arbitration awards in the regular court~.*~ There Must Be a Legal Guarantee of Rights to Access Offkial Information. Making the channels available for the virtual library and electronic publishing is not enough. Something must flow through those channels. That means that publishers and users must be free to disclose and obtain access to relevant materials. This means that the law must facilitate access. In other words, there must be some kind of legal right of access to official information. It also means that the economics of electronic publishing for public information sources must be viable. Economic viability can come either through private publishers or by direct budgetary allocations for dissemination of basic legal information by the generating institutions.

THE INTERNET MUST BE OPEN TO SERVE ITS ELECTRONIC PUBLISHING AND VIRTUAL LIBRARY FUNCTIONS The virtual library and the cheap printing press essentially afforded by the Internet’s World Wide Web cannot become realities unless the Internet is open. The qualities of openness in this sense means that every layer of the “stack”** of communications and content layers must be free from artificial restrictions. Universal technical standards improve openness by making it easier for the different pieces of an information infrastructure to fit together. That is the virtue of the Internet’s IP, TCP-SMTP, NNTP, and HTTP standards. Once connected to the Internet, anyone can send an e-mail message, post to a news group, or mount a Web

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page, safe in the assurance that anyone else connected to the Internet will be able to read it. An open Internet also means that those wishing to connect to the Internet, whether primarily to receive information or to establish Web servers and to publish information, must not he subjected to licensing and market entry restrictions developed for older technologies such as radio and television broadcasting and telephone and telegraph services. The dist~buted, layered architecture of the Internet must be available to suppliers and consumers of information. That means two things. First, it means that centralization of content or communications functions by operation of law, as through exclusive franchises, is unnecessary and harmful. The economies of scale for virtual libraries and electronic publishing are low. Therefore there are no natural monopolies or efficiencies likely to result from state granted monopolies. Establishing such monopolies deprives public and private sectors of the efficiencies naturally available from the Internet. It also means that competition laws should ensure that those with monopoly power, however obtained, do not extend it into adjacent layers of the stack of communications and content. Just as incumbent telephone companies in the United States and elsewhere must be forced to unbundle their services and offer connections at any feasible point, so also must suppliers at content levels be prevented from limiting competition in adjacent markets. This is what the anti-trust proceeding against Microsoft is all about. An open infrastructure such as is described in this section ensures a diversity of sources and channels for public info~ation and also ensures marginal cost pricing and rapid introduction of new technologies. A huge Intranet for China is not good enough, While it would allow electronic publishing and virtual libraries to function independently within China, it would not support the rule of law needed by foreign investors and traders. There must be access from outside to have real transparency, and the principles for decision making must resemble Western principles. That means that the Chinese decision makers must have access to the West through the Internet.

CHINA’S CURRENT INFORMATION

INFRASTRUCTURE

Explanation of OSI Stack as a Model The open systems interconnection (OSI) stack is familiar to computer scientists. Published by the International Standards Organization. OS1 is an abstract concept of how different elements of computing systems, including networks of all kinds, fit together based on seven layers of function, ranging from electrical signals and hardware plug specifications at the bottom or level one up to the relationship between applications and operating systems at level seven. The seven layers of the OS1 stack embody the idea that subsystems making up a computer network can be disaggregated from each other. Each layer is defined in terms of the services it requires from the layers below it, its internal operations (protocols), and the services it provides the layers above it. If clear specifications exist for the functions to be performed by each subsystem or “layer” in the OS1 stack, and if protocols exist defining the interface between layers, computer programmers and hardware manufacturers can focus their energies on one or more subsystems or layers without having to pro-

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vide all of the layers. This gives the benefits of specialization to participants in the market for computer networks. The same basic ideas can be extended beyond the computer programs and electrical connections making up the OS1 stack itself. One can imagine the same kind of stack of layers in content and information access features2’ The World Wide Web has raised consciousness about that kind of layering of information value: Layer 1, the physical layer, defines the electrical and mechanical interface, including num~rs of pins, cable type, and electrical levels (voltage and current). It is a useful category for evaluating the physical communications infrastructure in China, focusing on the links. Layer 2, the data link layer, covers link setup and error control. It deals with frames. This is a useful category for evaluating the switching technology in China. _ . Layer 3, the network layer, deals with establishing virtual circuits. It defines how packets are assembled, disassembled, and routed. It is a useful category for reviewing data framing standards and facilities, and Internet backbone service.30 * Layer 4, the transport layer, is concerned with defining quality of service and is closely integrated with layer 5. Layer 4 is a useful category for reviewing Internet service in China. 31 Layer 5, the session layer, relates the logical user interface to the communications layers; it establishes and manages communications paths or channels between two communicating applications processes; it establishes and releases connections. Layer 6, the presentation layer, deals with data representation, data transformations on messages received from the application layer, compression, and data conversion and formatting, for instance, EBCDIC (Extended Binary-Coded Decimal Interchange Code, used by IBM instead of ASCII) to ASCII. This is a useful category for considering human language and character translation issues. Layer 7, the application layer, serves applications programs through service calls, providing file transfer, document transfer, and electronic mail. The application layer usually passes an address in the form of a service request to layer 5, the session layer, which maps addresses into a form that is acceptable to lower layers. This is a useful category for considering the availability of Internet applications such as e-mail and World Wide Web services in China.

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As noted, the OS1 stack has conceptual power beyond what is needed by network engineers. It expresses the idea instantiated by the Internet’s World Wide Web, that the elements of an information infrastructure can be unbundled. The OS1 stack provides not only a useful model for particularizing assessment of the communications and networking infrastructure in a country such as China, but also a conceptual model for assessing informational vaiue, that sits on top of the layers defined by the authors of the OS1 standard.32

The Physical layer Optical Fiber. China’s annual fiber optic cable installation in the public network has jumped from 3,140 km in 1988, to 22,035 in 1992, to 83,000 km in 1994. China’s estimated need for additional optical fiber are at least lOO,OOO-120,000 km (62,000-75,000

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miles) of fiber optic cable for each of the next three years.33 So far, the government has invested $28 billion in optical fiber infras~cture providing 75% of China’s telephone system trunk lines, and linking 85% of the country.34 China Telecom is in the process of creating a major fiber optic fink across the Pacific Ocean with the United States. This $1.2 billion project will support 960,~ telecommunication circuits, and is scheduled to be completed by the end of 1999. Wireless. China’s communication infrast~cture development plan relies on wireless communications technology both to provide connectivity in remote areas, and to connect those areas to the rest of the infrastructure. Wireless technology in China consists of paging, satellite, and cellular networks. A paging backbone available in 22 cities was launched, in October 1997. using the Motorola FLEX Protocol for pagers3’ Satellite communication networks, using Very Small Aperture Terminal (VSAT) technology, are being built in Shanghai and Guangzhou. Both of these systems will use ATT Tridom to install VSAT hubs. Cellular telephone use is widespread in China. Companies involved with providing cellular service in China are discussed in a following section. China’s digital cellular system leads information infrastructure elements in development. With more than 30 million users, the mobile communication market is booming in China. Motorola, Nortel, and Nokia are China’s leading cellular telephone service providers. Motorola has a contract to supply service for the China Eastern Communication Company (EASTCOM), and for the Zhenjiang Technical Import and Export company. Nortel signed a contract, in May 1996, to provide Global System for Mobile (GSM) service for the city of Chongquing. In July of 1996, Nokia arranged to provide similar services for the Zhejiang Posts and Telecommunications ministry. Motorola is working toward intr~ucing roaming capability between proprietary cellular networks in China. In October 1997, Motorola demonstrated CDMA (Code Division Multiple Access) roaming capability in Beijing. This capability uses the North American industry standard for cellular radio telecommunications inter-system operations (IS-41) to allow Motorola users to roam to a different vendor’s systems.36 Switches. With Iittle or no existing data infrast~cture in many rural areas, China does not have to consider investments already made in obsolete technology, and is free to leapfrog to advanced technology when establishing elements of infrastructure. With this freedom in mind, China’s telecommunications policies mandate that only advanced digital switches be installed for handling communications traffic on new networksx7 In efforts to expand circuit switched telephone capacity, China imported foreign switching technology from Alcatcl, ATT, Ericson, NEC Siemens, and others in the late 1980s. Joint ventures with these companies led to production and installation of copper teiephone cables, and central office switching equipment. Of these joint ventures, one of the most successful in reaping the benefits of telecommunications expansion since 1990 is the Shanghai Bell Telephone Equipment Manufactu~ng Corporation.” Chinese agencies have contracted with hardware suppliers Cisco Systems, and Bay Networks, to supply the switching needs of major data infrastructure development projects. Cisco Systems has been contracted by the ministry of posts and telecommunications to supply and install switches for the China National Financial Data Communications Back-

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bone Network (CPN). The network will connect financial institutions in 200 cities China. It will consolidate current X.25 and LAN traffic, and be capable of handling relay and ATM traffic. The China Internet Company has chosen Bay Networks to hubs, routers, and switches that will comprise the China Wide Web, a government sored, country-wide Intranet.

across frame supply spon-

Data layer The Chinese data network recently switched from heavy reliance on X.25 protocol to a higher speed frame relay system. Central agencies are approaching new technologies such as ISDN and ATM cautiously, waiting for the need for higher bandwith to be demonstrated. The central government has not yet decided to construct a national ATM network, and is first waiting to see the results of pilot projects underway in Beijing, Shanghai, and Guangzhou. ATT and Beijing Telecommunication Administration (BTA) introduced ISDN to China during the 1996 summer Olympics. An ISDN link was set up between Atlanta and Beijing. This link allowed newscasters to interview medal winners, and allowed athletes to see and speak to relatives in China. Since 1996, due to recent investment in frame relay by corporations and government agencies, ISDN has been slow to take hold in China.

xDSL. Use of digital subscriber loop technology (DSL) will allow China to use existing copper telephone wire for high bandwith data networking. This technology is being used in urban areas with extensive copper telephone lines in place. As part of the national frame relay network project, the Israeli company Or&it will provide HDSL service for the interconnection of frame relay switches between cities. Orckit will begin service in Beijing, Shanghai, Guangzhou, and Nanjing, and expand to include all major Chinese cities.39 Network layer The network layer selects pathways and provides connections between Internet users and host servers. The interoperability of the Internet is enabled by diverse information contained in packets to be transmitted over the network lawyer in a universal format, the TCP/ IP protocol. The network layer consists of a combination of public switched telephone networks and relatively new Internet backbone links and routers.40 Internet Backbones. China’s Internet backbone consists of four networks: ChinaNet, Ji Tong, Cemet, and Casnet. 41 Access to the ChinaNet and the Ji Tong networks is sold commercially by the Ministry of Information Industries.42 ChinaNet will carry international business information on a countrywide Intranet known as the China Wide Web. Ji Tong is the vehicle for The Golden Bridge project, a program to provide Internet access to the Chinese people as a public utility. Cemet is the original Internet network resulting from the connection of Chinese University networks. Casnet, a network developed in conjunction with the Chinese Academies of Science, provides a vehicle for research sharing and academic exchanges. Each of the four networks is connected to the global Internet through governmentally monitored gateway points.

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Along with the four nationwide networks, many provincial governments, and govemmental ministries have developed private networks. Many of these networks utilize ATM, wireless, and optical fiber technology, and are more advanced than the national networks. High speed, “infoport” networks designed to attract business are being deployed in Shanghai, Guangdong, and Tianjin. Internet Service Providers. Ji Tong and ChinaNet are the major, and governmentally authorized, Chinese Internet service providers. Both fall under the jurisdiction of the newly formed Ministry of Information Industry (MII). There are about 150 independent Internet service providers (ISP) competing with the large governmentally sponsored ISP’s. Both independent and governmentally run ISP’s provide monitored access to the global Internet. Users of these services must register with the MII, and agree to certain conditions of use before being given an account. With low rates of PC penetration in Chinese homes, Internet cafes have become popular in China. These cafes act as Internet Service Providers for many Chinese. Presentation

Layer-

English versus Chinese

Character

Sets

Computers, the Internet, and internetworking technology are dominated by the English language. The language barrier between English and Chinese is especially difficult because of the ideographic (icon) based nature of Chinese, and the impossibility of approximating it on an English keyboard. The traditional solution for this problem has been for Chinese people desiring to use computers to learn English. This solution severely limits the potential penetration of computer use in Chinese society. Another solution is the use of software developed to construct Chinese characters. This software allows users to choose characters by giving the computer general clues and choosing from increasingly specific sets of displayed options until the desired character is one of the choices. This software allows for the use of Chinese language, but it is cumbersome to use. The most promising solution is Chinese language voice recognition and translation software. Software that can recognize spoken Chinese, and display the character in Chinese, pinyin, and English is being developed by Microsoft, IBM, and Lucent Technologies. This software is also capable of using Optical Character Recognition (OCR) technology to recognize written Chinese documents. These documents can then be stored in a searchable database, published on the Internet, translated, and read aloud in English or Chinese. Using voice recognition software will extend the possibility of computer and Internet use to millions of Chinese. As these technologies are being developed and deployed, the Web permits information to be published to the world in whatever language it currently exists, allowing users and third parties to provide translations for themselves or others. Official translations can, of course, be prepared in due course, but availability of the information need not await the official translation. Application

Layer

The Application layer includes the basic Internet applications: the simplified mail transfer protocol (SMTP) and post office protocol (POP3), used for electronic mail; the file

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transfer protocol (FTP); the Telnet protocol used for remote log in; the network news transfer protocol (NNTP) used for exchanging newsgroup postings; and the hypertext transfer protocol (HTTP) and hypertext mark up language (HTML), which define the World Wide Web. A computer can be connected to the Internet and configured so that it makes available some of these protocols and not others. For example, a computer can be configured to run FTP and NNTP server software without also running HTTP. On that computer, one could upload and download files and post to newsgroups without having World Wide Web access. Similarly, one can configure a desktop computer so it has an e-mail client without having a Web browser. Which of these functions are enabled on computers connected with the Internet depends on the decision of the person controlling that particular computer and on the availability and cost of software products that perform the particular applications. Software performing the client side of all of these Internet applications is available for free or at very low prices. Thus, anyone able to afford a personal computer also is able to equip that computer to perform any of these applications. Server software for these functions is slightly more expensive, but state-of-the-art products are available for each of these functions at prices under $1,000. In the longer run, questions may exist about the anti-competitive effect of enterprises such as Microsoft extending their dominance over operating systems to various levels of the OS1 stack, including the application layer, but that is not a problem peculiar to China. Unless and until such dominance occurs, there are ample competitive alternatives for each of the major Internet applications. The application layer also can be understood to extend to the existence of Web servers and of core legal content, including that generated internally and that made available from external sources. Thus, using the OS1 model to inventory the state of the Chinese legal information infrastructure causes one to inventory the number and types of Web servers and their suitability for virtual library and electronic publishing functionality, and also to inventory the amount of legal content already available both Chinese content and external content of use to Chinese legal decision makers. Although Chinese universities have organized a number of Web servers, none of these has a particularly legal focus. They do not link to Chinese content; nor do they contain useful links to external content that might make up the begins of a virtual library for Chinese legal decision makers. Government

Policy

The Chinese government is challenged by the conflicting goals of maintaining control over information entering and leaving China, and fostering the commercial potential of the Internet. Internet regulation efforts of the Chinese government divide into two categories: first, regulation of existing networks and ISPs; and, second, provision of a countywide network for connectivity and Internet access. Regulation of existing networks began at the same time Internet accounts became commercially available in China, and, while not vigorously enforced, has increased in scope along with increases in numbers of ISPs and Internet users. Network regulation first took the form of a statement, in June 1995, by the Minister of Posts and Telecommunications saying that the government did not intend to allow full freedom of information through

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connections to the Internet. 43 Additiona regulation followed in January 1996 with a temporary ban on new Internet subsc~ptions, to allow full installation of content filtering software on International gateways,44 and in February 1996 with the requirement that all existing users and networks register with the Ministry of Posts and Telecommunications.45 More specific regulations were announced at the end of 1997. These regulations defined what behavior in Cyberspace would constitute intolerable dissent.46 The major thrust of the Chinese governmental effort to regulate use of the Internet is ChinaNet, a network providing countrywide connectivity while allowing the government to n~aintain control over what foreign info~ation is accessible within China. ChinaNet is operated by the China Internet Corporation (CIC), which is owned by Xinhua, China’s official news agency. CIC is developing ChinaNet with technology partners Sun Microsystems, Oracle, Bay Networks, IBM, Microsoft, Netscape, PointCast, and Cisco Systems; and with content partners Bloomberg, Reuters, Dun & Bradstreet, Nikkei, and The Financial Times. Chinese individuals and business can access information on ChinaNet via the China Wide Web, a vehicle for electronic content intended to provide limited global Internet access, and international business information to China. China Wide Web is operational and available in the Chinese cities of Beijing, Shanghai, Guangzhou, Nanjing, and Jinan, with plans for service in 50 cities via Xinhua satellites by 1999.47 While independent Internet service providers offering direct connection to the global Internet exist in China, regulations make usage of these services to access many foreign Web sites illegal under Chinese law. The Ministry of Information Industry maintains control over what information is transmitted between ChinaNet and the global Internet through the use of screening and firewalls to exclude viewing of selected material and Internet sites.

ASSISTING RULE OF LAW IN CHINA Basic Concepts The most constructive effort to accelerate the implementation would involve a three-prong effort: l

l

of a rule of law in China

Implementation of a plan to enhance rule of law, and through it economic development in China, by connecting Chinese legal institutions through the Internet. This would involve the steps outlined below to identify major legal institutions likely to be involved in resolving foreign economic disputes, making sure that they are connected to the Internet, insuring the availability of relevant foreign legal sources, and providing for the publication of major legal decisions involving economic disputes from Chinese sources. The purpose is to provide for electronic publishing and virtual library functions. Mobilizing American educational institutions, including law schools and business schools to teach American lawyers and business people how to do business in China, including giving them basic conversational knowledge of the Chinese language.

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l

Undertaking a cooperative effort with Chinese i~titutions to train Chinese lawyers, business people and judges about Westen and international commercial law. The point here is not to train Chinese lawyers and judges to abandon Chinese legal and cultural traditions; the point is to acquaint them with the expectations of foreign business partners so that they can appreciate the context, foreign as well as Chinese, in which commercial ventures are formed between foreign and Chinese partners.

Next Steps Identify Two or Three Target Legal Institutions (RC). China is a big country, and it makes little sense to attempt to move all of its legal institutions to the Internet simuhaneously. Rather, the legal information infrastructure project should begin with two or three targets of opportunity. Once those targets are connected to the Internet and are using its virtual library and electronic publishing functions, a second, larger group can proceed to do the same thing and then a still larger group and so on. Such a progressive implementation of Internet technology permits the basic concepts to be refined, and engenders growing support from the legal ~o~unity and those controlling resources as the benefits of Internet technology are demonstrated in operationai legal settings. Because the main argument in favor of connecting legal institutions to the Internet is the need for a commercial rule of law, the best early targets of opportunity would be legal institutions+ourts or arbitration bodies-that have a heavy commercial case load. Because the ultimate Chinese aim is to induce accelerated foreign investment trading, desirable target institutions will be involved or are likely to become involved in resolving commercial disputes in which one of the parties is a foreign entity. A related question on the selection of institution is whether the institution engages primarily in fact finding or legal analysis. A fact finding institution can benefit from automation, but benefits more from electronic filing than from the virtual library and electronic publishing functions. In order for electronic filing to work, a significant portion of those doing business with the institution must have the requisite capability to file electronically. This imposes a greater burden on a demonstration project because it means that the bar as well as the court must be automated. Conversely, a law finding and law making court, such as an appellate court in the United States, has greater need than a fact finding institution for the virtual library function, because it needs to know of other cases and the reasoning used by other decision makers. The electronic publishing function is more important to a law finding and law making institution because its decisions and their supporting reasoning are needed by other institutions as a part of their virtual library. Appellate courts, thus, are good candidates. Parliamentary bodies are prime candidates for Web connectivity because they make law and need to publish it if there is to be compliance. In making law, they need to have access to various models from other parts of China and from parts of the outside world. Informal tribunals are less attractive candidates, because more of their activities are oral rather than written, because they usually do not produce analytical decisions intended as guides to future decision makers, and because their decisions are more appropriately influenced by the factual circumstances and the interests of the parties in a particular case rather than by legal precedent. On the other hand, basic e-mail capability and Web publishing

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capability oriented toward docket management, along the lines demonstrated by the virtual magistrate system, can be great advantages to an informal adjustment tribunal. Possible Targets. The Chinese legal system comprises seven major components: the Ministry of Justice; the Peoples’ Courts; administrative agencies; “special” areas, including foreign trade and accounting rule development; “institutes” including law schools and research institutes; the legislature; and the arbitration system. The Ministry of Justice has responsibility for education of lawyers, for administering the penal system, and for administrative support for the courts. It is not itself a major consumer or originator of information suitable for Web publishing, but its budgetary and policy support is essential for the virtual library and electronic publishing initiatives. It is a key institution for education of Chinese lawyers. The judicial system includes three kinds of courts: the local Peoples’ courts, the Supreme People’s Court, and the special co~rts.~* Local courts include “basic-level people’s courts, ” “intermediate people’s courts,” and “higher people’s courts. 7.49 “The basic-level courts have economic divisions to hear commercial disputes. The intermediate people’s courts function on the prefecture, autonomous region, and city level, directly under the control of the central government. The intermediate court has original jurisdiction over disputes involving foreign persons. The higher people’s court functions at the provincial level and acts as both a trial court and a court of appeals. The Supreme People’s Court has administrative jurisdiction over the other courts, original jurisdiction in designated cases, and appellate jurisdiction over the higher and specialty co~rts.“~~) Specialty courts include economic courts, which have jurisdiction over disputes involving foreign enterprises, as well as strictly domestic economic disputes.51 The judicial system also includes the prosecutorial function. As in the United States, most of the details of the law are found in rules issued by administrative agencies. There is reported to be great interest in China in making this source of law more widely available. The special areas may be the best near-term target for substantive law, especially that pertaining to rules of the Ministry of Foreign Trade, and accounting rules issued by the Ministry of Finance. The institute sector is where most of the Internet activity still is. Law schools, especially the Department of Law at Tsinghua University,52 Chinese Renmin (People) University Law Schoo1,53 and the prestigious Beijing University Law School,54 are beginning to explore the Internet as a channel for legal information. Partnerships with such institutions could be productive. The legislature is centered on the Peoples’ Congress. Although not thought of as having great political power, all laws originate there, as a formal matter. Accordingly, the legislature is an appropriate target for electronic publishing of Chinese legal materials. Arbitration is encouraged as the principal mechanism for resolving commercial disputes. Chapter VI of the FECL provides for resolution of foreign contractual disputes through a dispute resolution hierarchy, beginning with consultation or mediation, followed by arbitration and by judicial resolution.55 Arbitration of economic disputes in China takes place under the 1958 New York convention, 56 The top level arbitration body is the China International Economic and Trade Arbi-

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tration Commission (CITAC), which applies the 1994 arbitration law57 and arbitration rules based on International Chamber of Commerce Arbitration rules, UNCITRAL model rules on international commercial arbitration, 58 and the Stockholm Chamber of Commerce Arbitration Institute rules.59 Domestic arbitration is handled by arbitration commissions in centrally governed municipalities, capital cities of provinces, and other major commercial and industrial cities. Arbitration committees are guaranteed their independence by the arbitration law.60 A Chinese arbitration association is a self-regulatory agency overseeing arbitration commissions.61 The panel of arbitrators currently maintained by CIATAC has 296 members, including 80 foreign nationals.62 Although arbitration of disputes involving foreign entities can take place within the CIATAC system, under rules resembling the UNCITRAL rules, it is expected that the UNCITRAL arbitration will prove to be the main channel for commercial arbitration of transnational disputes. The content of the arbitration law, of the UNCITRAL agreement, the CIATAC and UNCITRAL rules, derived through CIATAC arbitrators, and major decisions by CIATAC and UNCITRAL panels63 are appropriate targets for electronic publishing and, thus, for the Chinese law section of the virtual library. Elicit Cooperation. Obviously, a target institution must be willing to participate in a demonstration program using new technology. While expertise in using the Internet is not necessary, development of the demonstration program will be easier for everyone if some personnel at the target institution have knowledge and interest in basic computer technology. An entrepreneurial spirit also is helpful. In the absence of such a spirit, various rules and traditions can get in the way of automation even though underlying purposes and principles need not be sacrificed if details of rules and traditions are flexible. At the physical level, adequate communications capability is necessary. This capability is provided either through good dial-up terrestrial telephone service, or through digital cellular capability for data transmissions. High bandwidth (100 kbps or better) permanent connections also are desirable, although basic virtual library functions and electronic publishing can be implemented through a mirror site with only dial-up connectivity. Permanent connections through leased lines running PPP, X.25 or frame relay are acceptable as our ISDN and xDSL. For shorter distances, wireless LAN technology under the 802.11 standard also would be acceptable, providing distances up to five to seven kilometers. Procure and Install Initial Hardware. Each target institution needs space on a Web server permanently connected to the Internet. Each major user needs a Pentium workstation equipped with Windows 95, word processing software, and Web browser and e-mail client software. The server must have an operating system-UNIX or Windows NT, Web server software, and e-mail server software. Although local area network and wide area network capabilities can be combined by using dial-up lines and modems for each workstation, better performance and less technical support results from a hardwired connection. That means a network interface card for each workstation, and either Novell netware or a Windows NT/95 networking software. Windows 95 has good peer to peer LAN capability built in, but security and user training are

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important in order to prevent problems associated with shared data being available only on one user station that the user can turn off. On the other hand, the Novell architecture requires dedicating a computer to be the LAN server. Often, the most difficult challenge is stringing the wire necessary to connect the workstations. Wireless LAN technology also could be considered for the internal LAN, depending on building configuration and building materials. Establish Web Sites. Each major institution originating information should have a Web site on which to publish that info~ation. Each major consumer of information should have a Web client through which to access information from the Web’s virtual library. Publishing requires one Web site per institution. Information use suggests one PC-installed Web browser per individual user. Of course, users can share Web browsers initially just as they share library facilities. Having a Web site does not mean that an institution must have a physical computer on its premises or under its control. Rather, having a Web site means having electronic access to disk space, server software, and connections to a machine connected to the Internet. It is entirely feasible for the Web site for a court in Shanghai to be located on a computer in Beijing as long as the person publishing information in Shanghai has reliable, relatively inexpensive connections to the computer in Beijing with low latency and adequate bandwidth.@ Low latency is impo~ant for interactive remote login sessions, which are necessary for giving commands to the remote computer. High bandwidth is not necessary for these sessions but is necessary for transfers of files to be published, an operation in which latency is unimportant. Select and Train Webmasters. Neither Web publishing nor use of the Web’s virtual library requires a large staff. One half-time Webmaster per institution publishing significant amounts of information should be sufficient. Each Webmaster needs basic training on UNIX or Windows NT-whichever operating system is used-and needs to know HTML. (The UNIX or NT training is not strictly necessary.) It is very possible to publish information using conversion functions and publishing wizards built into word processing applications Identify Initial Content. Building a legal information infras~cture is an interactive process. As soon as content can be available on the Web, making it available establishes the core of a virtual library, which helps convince consumers of information and potential publishers of other information to connect themselves to the technology. As each new wave begins to participate, it can contribute new categories of information. In establishing a useful virtual library, infrast~cture architects must consider two issues. First, they must decide what information outside China should be made accessible through the Web. Second, they must decide what information originating in China should be published on the Web. Answering the question concerning information originating outside China depends on what participants in the Chinese legal systems will find most useful. Given that the focus of the initiative is on commercial law, and given that China is in a tr~sition, re-evaluating its own commercial law, useful categories would include models from other countries. This category would include corporation law statutes, the uniform commercial code, all UNCITRAL model statutes, bankruptcy law, and banking law. Ideally, selections would be avail-

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able from more than one country, with a preference given to countries participating actively in Asian trade. With respect to electronic publishing of information originating inside China, two factors should determine priorities: the availability of information in electronic form, and the level of authority of the institution originating the information. A higher level court or legislature would rank higher on the second dimension than a lower level one. Even if information from certain key institutions is not available immediately in electronic form, information that is available should be published on the Web to prove the utility of Webbased information access. Seeing what another court or legislature has done can encourage reluctant courts or legislatures to participate in the new technology. Construction of the virtual library and commencement of electronic publishing should not be held up pending the construction of a complete index or set of information categories. Nor should it await translation of information into any particular language. One of the advantages of the Web is that information can be published in whatever language it exists, enabling anyone in the world to provide unofficial translations, directly on a suitably designed Web page if that is desired by the publisher of the information. Similarly, unlike with traditional database construction, it is relatively easy to organize information once it is on a Web site. Thus, publishing information immediately, once it exists in electronic form, is desirable because its content is available sooner, and designers of indexing and category systems experience no particular disadvantage in adding their value to the site with content already on it. For Virtual For the virtual library, the following l

l

l

l

l

l

l

foreign legal materials would be most pertinent:

The Uniform Commercial Code; The German Commercial Code; The United States and European Union administrative guidelines on mergers and joint ventures; Foreign Arbitration Rules of the American Arbitration Association; International Chamber of Commerce Commercial Arbitration Rules; UNCITRAL model international arbitration rules; and UNCITRAL model commercial laws. For Electronic

Obvious candidates l

l

l

l

library

for electronic

publishing

The FECL; The arbitration law; The CIATAC rules; and Foreign arbitration awards involving

Publishing include:

Chinese ventures.

Set up On-going Exchange Program. Promoting trade and investment and establishing a rule of law require ongoing dialogues between professionals in China and professionals in other parts of the world. Two groups are especially important: lawyers and Webmasters.

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China and the West have distinctive legal traditions. It is unlikely that rule of law in China ever will mean exactly what it means in the West. Just as an American lawyer advising a client who does business in Europe must understand subtle differences between the civil law and common law traditions, so must an American lawyer advising a client doing business in China understand differences between the Chinese and American legal traditions. Chinese lawyers also must understand Western legal traditions. To the extent that rule of law is a precondition to successful trade and investment promotion, Chinese lawyers must be able to advise their clients on how to establish appropriate legal institutions consistent with the Chinese tradition, and how to negotiate commercial deals that link to those institutions. The best way for legal professionals to learn about the other legal tradition is to spend some time in the other part of the world, actually interacting with lawyers and legal institutions. Such physical exchanges can be supplemented by Web-based discussion groups and specialized virtual libraries. To a considerable extent the basic physical exchange can be organized by law schools in China and the United States. It is important, however, that the exchange students include practitioners as well as candidates for the initial law degree. Practitioners are better positioned to appreciate the differences between institutional styles and practice settings than degree candidates who have not yet developed much experience with the legal system in there own countries. Moreover, exchange students should spend some of their time outside the academic environment. The ideal exchange program would have some course work and some language training coupled with extemship assignments in law firms and other legal institutions. Exchange of professional Webmasters is desirable initially to accelerate the transfer of technical knowledge from the West to China about setting up Web servers and organizing Web publishing. Over the longer run, this kind of professional exchange is desirable so that Webmaster in both China and the West can appreciate more fully different approaches to Internet architectures in both geographic areas. It is likely that the different Chinese history with respect to the physical telecommunications infrastructure, and its initial organization of Internet nodes to limit connections outside the country, will result in a different architecture shaping traffic flows and performance.

CONCLUSION As a low-cost virtual library and cheap printing press, the Internet’s World Wide Web can hasten the implementation of a rule of law in China and, thus, accelerate economic development by enabling foreign trade and investment. To realize this potential, the Internet’s inherent character as an open network must be maintained, free of information or communication monopolies. Then, fairly quickly, key legal institutions in China can be connected to the Internet, and their decisional law published through the World Wide Web. They can be given access to key international commercial law documents. At the same time, American lawyers and business people can be educated on how to do business in China, and given a basic competency in the Chinese language. Chinese legal professionals can be

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exposed to Western law so that a professional and technical interchange can occur not only at the hardware and software level, but also at the human level. This article was written prior to President Clinton’s July 1998 visit to China. During this visit, Presidents’ Clinton and Jiang reaffirmed their commitment to promoting the rule of law in China’s economic and legal system. Rule of will allows Chinese business practices to conform to international business conventions, thus creating a predictable business environment in China. The importance of using information technology to promote transparency and foster effective business practices is reinforced by the 1998 U.S.-China presidential summit. As China strives to balance economic reform with avoidance of the Asian financial crisis, effective business practices are more important than ever to the Chinese economy.

NOTES AND REFERENCES 1. 2. 3. 4. 5. 6. I. 8. 9. 10 11. 12. 13. 14

15.

16.

17. 18. 19 20. 21. 22.

23.

Andrew J. Nathan & Robert S. Ross, The Great Wall and the Empty Fortress: China :r Search for Security (New York: Norton, 1997) [hereinafter “Empty Fortress”] Ibid. Criminal Justice OnLine, September - October 1996. See notes 43 to 47 and accompanying text. Empty Fortress. David E. Sanger, “Market Reform Irreversible, Chinese Leader Tells U.S.,” The New York Times OnLine International (September 27, 1997). Joint Statement of Jiang Zemin and President Clinton (October 29, 1997). Political and Economic Risk Consultancy. Country Risk Report: China. The World Bank Competitiveness Indicators. Empty Fortress. David Lague, “Beijing to Tighten Grip on Shaky Banks,” Sydney Morning Herald, (November 14, 1997). Sanger, “Market Reform Irreversible, Chinese Leader Tells U.S.” The White House Office of the Press Secretary, FACT SHEET: Accomplishments of U.S.-China Summit (October 29, 1997). Richard H. Fallon, “‘The Rule of Law’as a Concepi in Constifufional Discourse,” Columbia Law Review 97( 1997). Professor Fallon explores four different conceptions of Rule of Law: (1) historicist, (2) formalist, (3) Legal Process, and (4) substantive (p. 5). He concludes that the most useful understanding of a rule of law combines aspects of all four conceptions. See Ingersoll Milling Machine Co. v. Granger, 833 E2d 680, 687-88 (7th Cir. 1987) (differences in Belgian procedure from U. S. procedure do not justify refusal to enforce Belgian judgment). Article 14(l) of the International Covenant on Civil and Political Rights guarantees access to unbiased decisionmaker (“fair, competent, and independent”) and to public judgments in civil actions, except when special circumstances justify excluding the public. Mark C. Lewis, Note: “Contract Law in the People’s Republic of China-Rule or Tool: Can the PRC’s Foreign Economic Contract Law Be Administered According to The Rule of Law?” (Discussing areas in which legal reforms are needed), Vanderbilf Journal of Transacfional Law, 30 (1997): 529 (noting shortage of published judicial decisions as an “institutional deficiency” in the Chinese legal system). Ibid. Ibid. Ibid., pp. 495, 532. Ibid. p. 533. Ibid. Ibid., p. 526. Lewis also suggests mitigating the need for specialized training of judicial officers by further splitting courts into those handling domestic legal disputes and those handling foreign economic disputes (p. 527) Ibid. p. 528.

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24. 25. 26. 27. 28. 29.

30.

31.

32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42.

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Ibid., p. 526. Ibid., p. 527 n232. Ibid., n232. Citing Gerald Chen, “The Civil Society’ Is Expanding by the Day; Civil Rights on the Mainland,” Window (Hong Kong, November 8, 1996). Available in 1986 ~112924330). See Ibid., p. 527 (noting advantages of arbitration of disputes with parties in China, but also noting that arbitration awards must be enforced and that sometimes Chinese courts delay enforcement). See Ibid., explaining the OS1 stack, as a model for thinking about different elements of information and communications services. See Henry H. Per&t, Jr., “Federal Electronic Information Policy,” Temple Law Review (1990) p. 201 (describing stack of value added features); Henry H. Perritt, Jr., “Market Structures for Electronic Publishing and Electronic Contracting, ” in Building Information Infrastructure: Issues in the Development of the National Research and Education Network (Cambridge, MA.: Harvard University and McGraw-Hill 1992); Henry H. Per&, Jr., “Format and Content Standards for the Electronic Exchange of Legal Information,” Journal of Jurimetric.s. 33 (1993): 265. “Historically, “retail” Internet service providers leased point to point telephone lines from their points of presence to transit networks to which they were connected through routers. At their points of presence, they provided multiple dial-up telephone numbers backed up by modems and terminal servers to aggregate traffit. Transit providers leased higher-capacity point to point telephone lines to link routers to which “retail” Internet service providers were connected. The Internet, thus, was layered on top of the telephone system and constituted a combination of routers, leased telephone lines, dial-up telephone points of presence, and associated organizational and human infrastructure to provide training, service, and maintenance. “Now. the Internet conceptually is more complicated for several reasons. Dial-up lines now often are virtual, constituting an entitlement to pass traffic through frame relay or SMDS connections with local exchange and interexchange telephone carriers. These connections often are digital and involve some packet switching. Thus, rather than sending IP packets over a simple electrical connection (in the case of a dedicated point to point line) or over an analog telephone circuit (as in the case of a dial-up line), IP packets often move over an underlying digital network using other kinds of packets or cells. “Second, the ways in which customers can access a “retail” ISP have become more complex. ISDN customers bypass modems and pass digital traffic directly into an ISDN switch and from there into a router for ISP. Increasingly, retail ISPs and telephone companies are arranging for the ISP to bypass the local office telephone switch for large customers, thereby giving the ISP the advantage of the unbundling of telephone service mandated by the 1996 Telecommunications Act, and reducing the likelihood of congestion in telephone company switches.” Henry H. Perritt, Jr.. LAM;and the Information Superhighway (New York: Wiley. 1998). gl.2A. Level three (the nemork layer) includes standards for packetizing and depacketizing data in packet switched networks and also include standards for routing packets. Level four (the transport layer) includes information on reassembling packets and checking for errors. These two levels correspond roughly to the IP standard and TCP standard, respectively. TCP and IP are the two standards or protocols that define the Internet. See note 29. China Telecoms 2000: Vol. 2 Fiber Optic Markets, Information Gatekeepers Inc. Time International, “China Gets Wired” (January 11, 1998). Motorola Press Release, “China Telecom Selects Motorola’s Infrastructure or Its FLEX Protocol-Based Backbone Network’ (September 24, 1996). Motorola Press Release, “Motorola First to Successfully Complete CDMA Network Roaming Tests in China” (October 15. 1997). China Telecoms 2000: Vol. 2 Fiber Optic Markets (Information Gatekeepers Inc.). Milton Mueller & Zixiang Tan, China in the Information Age (Westport. CT: Greenwood Press. 1997). “Orckit Wins Country-Wide HDSL Tender for China,” Tel Aviv, Israel, Orckit Press Release (May 19. 1997). See note 30 for a basic explanation of how the Internet “sits on top” of the telephone system. Mueller & Tan, China in the Information Age. The Ministry of Information Industry (MII) was created in March, 1997, combining the functions of the Ministry of Electronic Information (MEI) and the Ministry of Posts and Telecommunications (MPT). former operators of Ji Tong, and ChinaNet.

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43. 44. 45. 46. 47. 48. 49. 50. 51. 52. 53. 54. 55. 56.

57. 58. 59. 60. 61. 62. 63. 64.

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Teresa Poole, “China Seeks to Make the Internet Toe Party Line,” The Independenr (London, January 5, 1996). Mueller & Tan, China in fhe Information Age. “China Issues Regulations To Control Internet,” Newsbytes Pacijica (February 6, 1996). Erik Eckholm, “China Cracks down on Dissent in Cyberspace,” New York Times (December 31, 1997). China Internet Corporation Press Release (www.china.com). Lewis, “Contract Law ,” p. 5 14. Ibid. Ibid. Ibid. Chinese practitioners think of the special courts as being limited to maritime matters. Tsinghua is a major technological university analogous to MIT or IIT. Chinese Renmin established a Legal Information Index Center 15 years ago. Beijing University Law School has established a legal information network. Lewis, “Contract Law.. .,” pp. 5 13-5 14. Benjamin P. Fishbume III & Chun Cheng Lian, “Commercial Arbitration in Hong Kong and China: A Comparative Analysis,” Universify of Pennsylvania Journal of International Law, 18 (1997): 306 (noting China’s accession to the New York convention). Ibid. pp. 303-304. China agreed to accept the UNCITRAL arbitration rules in The China-United States: Agreement on Trade Relations (1979). 18 I.L.M. 1041 (1979). which entered into force in China on February 1, 1980. Fishbume & Lian, “Commercial Arbitration in Hong Kong and China,” p. 305. Ibid. Ibid., p. 306. Ibid., p. 305. The parties to arbitration may specify whether the arbitration decision is public or private. Latency refers to the transit time of information.