Friday, October 8, 2010

Corporate Governance: India and China Compared

While a fairly extensive body of literature that compares India and China has developed in the economics and business spheres, comparative analyses of the legal regime in these two countries is somewhat nascent. In that regard, a new book China, India and the International Economic Order, edited by Professors M. Sornarajah and Wang Jiangyu at the Faculty of Law, National University of Singapore (NUS) represents an important contribution to the legal comparison of economic, business and trade matters relating to the two emerging giants. The abstract of the book is as follows:
With contributions by a variety of internationally distinguished scholars on international law, world trade, business law and development, this unique examination of the roles of China and India in the new world economy adopts the perspectives of international economic law and comparative law. The two countries are compared with respect to issues concerning trade and development, the World Trade Organization, international dispute settlement, regional/free trade agreements, outsourcing, international investment, foreign investment, corporate governance, competition law and policy, and law and development in general. The findings demonstrate that, though their domestic approaches to economic issues diverge, China and India adopt similar stances at the international level on many major issues, recapturing images which existed during the immediate post-colonial era. Cooperation between China and India could provide leadership in the struggle for economic development in developing countries.
Of immediate relevance to the theme of this Blog is a chapter The Development of Modern Corporate Governance in China and India authored by Professors Nicholas C. Howson and Vikramaditya Khanna at the University of Michigan Law School, the abstract of which is as follows:
This chapter examines the development of corporate governance in the world’s two biggest and fastest growing emerging markets - China and India. Although both countries are different in important ways, they also share significant similarities such as rapid economic development, significant foreign investment, economic, structural and legal reform, and a shared interest in (if not implementation of) essentially Anglo-American corporate law norms. These differences and similarities provide an interesting and rich platform for consideration of popular or contested corporate governance precepts. In particular, after an extensive discussion of corporate governance reforms in both countries and corporatization in China, we examine the impact of “legal origins” (common law or civil law) as compared to “politics” on the development of corporate governance and stock markets in both countries. In addition, we focus on the question of whether India and China provide supporting or contradicting evidence for some kind of global convergence in corporate law. We find that the support for the “legal origins” view is not strong, but rather the “politics” accounts seem more convincing as explanations for corporate governance and stock market development in India and China. Further, while there is a good deal of evidence of partial formal convergence in corporate law, we cannot identify the same or expected convergence in ownership or corporate structure. This creates an odd fit between corporate and securities law and the corporations they shape and regulate, suggesting some significant path dependence for these two important economies.

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