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TEXT 6. TRADE AND LAW IN EARLY CHINESE HISTORY
Ancient China was one of the world's oldest civilisations, possessing advanced technology and rich natural resources. It is not clear exactly when Chinese merchants began to trade with foreign merchants, but Chinese knives were found in Bronze Age graves of the East Urals, and Chinese silk, lacquerware, bronze mirrors and jade carvings were found in early Iron Age graves west of Lake Baikal by Soviet workers. Also, 'customs barriers and duties were mentioned [in Chinese books] in considerable detail' in 522 BC. But these customs barriers and duties were probably applicable mainly to the trading activities between the small Chinese states (although certain Sinologists may disagree as to whether these small states were Chinese or not). Although it is believed that in the fourth or third century BC Chinese silks reached India, and Chinese merchants traded with Koreans, trading with foreigners in that period must have been very limited.
The Silk Road refers to a route of trade in the northwest of China linking China with central Asia, the Middle East and Europe, in particular with Iran. This route was established as a passage for traders in the Han Dynasty (206 BC-220 AD). Frontier trade fairs between merchants from inland China and people in the areas near the Silk Road (for example, the region known today as Tibet), were recorded in 140 BC. Certain trading activity between ancient China and ancient Rome, through either the Silk Road, or maritime trade, existed in 106 BC. Many foreign merchants visited China in the first and second centuries. The Turks began to trade with the Chinese in the fifth century and Arabian merchants came to trade in China in the Tang Dynasty in the seventh century. Chinese merchants sailed to Indian ports, the Red Sea, the Persian Gulf and the east African coast in the fifteenth century. For centuries, Japanese, Koreans, Iranians, Indians, Arabians, Vietnamese, and merchants from Southeast Asia arrived in China by sea. Chinese textiles, porcelain and crafts flowed out of China through the Silk Road and ships, and Atlai gold, Indian and Iranian gems, soybean and grapevines flowed into China through the Silk Road and ships too. In the sixteenth century, Portuguese ships visited China. This was the beginning of a larger scaled Sino-Western trade. In the seventeenth and eighteenth centuries, besides exporting its textiles, porcelain and crafts, China was the major supplier of tea to Europe.
Commercial law in ancient China did not receive much legislative attention, nor was there any rule equivalent to the law merchant in England. The underdevelopment of Chinese commercial law has its root cause in Confucianism, which regarded merchants as one of the lowest classes in a complex social hierarchy. In early Chinese legal history there were only scattered records of law directly or indirectly dealing with foreign trade. It appears that the Qin Dynasty (221-205 BC) legislated for the control and taxation of commercial transactions, but did not set out rules for determining liabilities of merchants in commercial transactions. In the Han Dynasty (206 BC-220 AD), the Phoenicians, Carthaginians and Syrians were said to have carried out maritime trade with the Chinese. The Han Government adopted a licence system to control foreign trade, although no legal rule of foreign trading was recorded. Trading with foreigners without a licence was punishable by the death penalty. It appears that although the Chinese Government at that time did not prohibit foreign trade, it did exercise close control. Such close control of foreign trade, in particular the sea-borne trade conducted in the coastal cities of southern China, was seen in the Sung Dynasty (960-1368 AD), where the government interfered with foreign trading activities in Canton by adjusting customs policies, regulating the measures and means of payment and stationing armies in the markets or fairs. A similar idea of government control of the merchant markets was also seen in the Ming Code (Daminglu), which existed between 1368 and 1644 AD. As part of the government policy of controlling foreign trade, Zheng He was sent as an official representative of the Ming Emperors to carry out seven diplomatic and commercial missions to a number of countries in the Indian Ocean situated around the Red Sea, the Persian Gulf and the area currently known as Southeast Asia.
The earliest Chinese law which made direct reference to foreign trade in China was perhaps the Tang Code (Tanglu) which existed between approximately 581 and 960 AD. A provision of this code stated that disputes between foreigners of the same nationality should be determined by referring to their own customs and laws, and disputes between foreigners of different nationalities should be resolved under the code. Foreigners' in this provision referred to both foreign merchants and visitors. There were many foreign merchants in Tang times because it was one of the strongest and richest dynasties in Chinese history. It is believed that the earliest bills of exchange in China were created in 806-820 AD during the Tang Dynasty. They were named feiqian, meaning fly-assumed that Chinese governments interfered with the commercial markets by direct or indirect control before the seventeenth century, but did not create any system of commercial law or law merchant.
Historically, Chinese governments consistently adopted a restrictive policy toward foreign trade. The policy of banning overseas trade was adopted by the Ming Dynasty for the first time in Chinese history. This policy prohibited Chinese citizens from sailing overseas and from selling a number of goods to foreign merchants. This policy continued in the Qing Dynasty (1644-1911), and led to the 1840-1842 Opium Wars. The government was forced to abandon the policy of banning foreign trade as a result of the Wars. In the early nineteenth century, the Chinese adopted a number of codes, which were based on the German and Japanese model of law. The General Rules of Merchants (Shang Ren Tong Li) were formulated in 1903. These rules contained nine provisions, setting out general principles for mercantile transactions in China. This was the first time in Chinese history that the general rules applicable to merchants were codified.
The history of Chinese commercial law had hardly any impact on the development of the existing system of international commercial law. However, an understanding of the basic history of the Chinese law dealing with foreign trade enables us to appreciate the present development of Chinese law governing foreign trade and investment. The current Chinese Government's practice of formulating special laws for foreign investments in China can by analogy be traced back to the Tang Code which provided that disputes between foreign merchants from the same country should be governed by the relevant foreign law.