Preface

My project, the Studies of Strategies to Maintain Economic Stability, Financial Stability and Capital Market Stability(Project Approval Number:08AJY037)，was initiated back in the April of 2009, and it was completed in the June of 2014 and was submitted to National Planning Office of Philosophy and Social Science for review.The Office approved the project in the August of 2015.The on going project continued for 6 years, from the initial stage of demonstration, tender submission, approval to initiate, demonstration conference, publication of results by different phases, anonymous reviews for the projects knot, to additional amendments to the project at the end.During this period, I questioned the analytic framework of my project and amended the results from different phases before publishing them.The entire process was an interwork of questioning and thinking, coexistence of inheriting and creating.Now the project was finally completed and it is time to submit my script, it is meaningful for me to trace back to my thought process and investigate my own work.

This key project received its approval to initiate in the April of 2009.On the 17th of July in 2009, a demonstration conference was called for this project.The attendees of this conference included but not limited to Shucheng Liu, Director from Institute of Economics Chinese Academy of Social Sciences, Yuyan Zhang, Director from Institute of World Economics and Politics Chinese Academy of Social Sciences, Zhongli Yin, Analyst from Institute of Financial Research Chinese Academy of Social Sciences, Professor Hongxiu Shi from Economics Department in China Academy of Governance, Zhongmin Wang, Vice President of National Council for Social Security Fund, the Peoples Republic of China, Zhichao Lin, Director of Social Insurance Funds Supervision Department of Ministry of Human Resources and Social Security of the Peoples Republic of China, Weigang Jin, Vice Director of Social Insurance Research Institute, Professor Anling Fei, Shaojun Liu from Civil and Commercial Law School and Professor Hongchang Jiao from Law School in China University of Political Science and Law, Professor Guangdong Xu, Professor Jiye Hu and Associate Professor Binwei Gui from the Center for Law and Economics of China University of Political Science and Law.These 20odds experts were part of the discussion of this project.

After listening to my proposal at the conference, the experts offered many pertinent opinions and advice.They suggested that in order to make meaningful discussion on the strategies to maintain economic and financial stability, I should not consider the economic or finance as they stand.The fluctuation in economy and finance could appear in the forms of overrated inflation rate;the un-equilibrium structure of investment, expenses and import and export trades;unstable domestic economy inflicted by the impacts from international financial crisis;or reduction of output, discontinuation or even bankruptcy of domestic corporations;or even runs on banks.In order to prevent unstable economy or unstable finance, it was essential to discuss the issue from its institutional aspect and to focus on the legal institutional arrangements to maintain long-term economic stability and financial stability.The project team consisted of members with economics background and legal background, which allowed them to give full play of their expertise and to study the short-term strategies and long term institutional arrangements to maintain domestic economic and financial stability in the times of Financial Crisis in United States, European Debt Crisis and Uncertainty in Global Economy.As such, the project possessed both practical significance and theoretical significance.

I have listened to their opinions and advice, which helped broaden my view to this project and helped me understand it better.After the conference, I have discussed and amended the original analytic framework over and over.I then reconstructed the analytic framework by employing the content from economics and law, their respective analytic approach and viewpoint from the interdisciplinary of economics and law.The theme was to study the relationship between economic stability and legal institution and the relationship between financial stability and legal institution and how to retain economic and financial stability with legal institution.Under this rationale, the economic instability caused by economic uncertainty and risks, its key lied in the currency policy and is related to Law of the Peoples Republic of China on the Peoples Bank of China;to adjust industrial structure, support investments in emerging industries and inhibit excess capacity, its key lied in the loan structure in commercial banks and the loan structure was related to Law of the Peoples Republic of China on Commercial Banks;to prevent the risks that may occur in the economic instability and to prevent the corporations bankruptcy and job loss caused by economic crisis, there should be remedy measures issued by the government and corresponding social insurance, thus its key lied in The Social Insurance Law of the Peoples Republic of China;to prevent the economic uncertainty and risks and build a positive interactive relationship between market mechanism and government supervision, not only was it necessary to exert the basic role of market regulation and allocation of resources but also necessary to exert the influence of government when the market failed, thus its key lied in Law of the Peoples Republic of China on Administrative Permission.From this perspective, this project has built an analytic framework based on the inter-discipline of economics and law.Within this framework, I studied the strategies to maintain economics stability and financial stability from the perspective of legal institution.

After building the framework, I planned the research schedule according to the analytic framework and subsequently published the articles that consisted of the results from phases of this research project.After amending results by phases, these results form the final results of this project, and then this book.

The results by phases published by me have also aroused some attentions and impacts.Some of the results have received comments and instructions from Members of the Political Bureau of the Communist Party of China Central Committee, the Vice Chairman of Standing Committee of National Peoples Congress, the Vice Chairman of Chinese peoples Political Consultative Conference and other chairmen from the party central committee and national leaders.There were four results by phases which received high attentions from National Development and Reform Commission, the Peoples Bank of China, the Legislative Affairs Commission of the Standing Committee of the National Peoples Congress and Legislative Affairs Office of the State Council of the Peoples Republic of China.Another two results by phases were invited respectively to participate in the Financial Crisis and World Economic Stability Conference held by World Bank and International Monetary Fund in Ottawa, Canada in 2009 and Post Financial Crisis Regulatory Reform held by OECD in Paris, France in 2010.Especially the analytic framework to study the relationship between 15 variables in macro-economics and Law of the Peoples Republic of China on the Peoples Bank of China, the analytic framework to study the fragility and risks of banks from the perspective of Law of the Peoples Republic of China on Commercial Banks have both drawn great attentions, discussions and questions from the academia.

Due to time constraints, this project was submitted for anonymous review and approved for finalization, but there are still a large number of topics to be further discussed in order to fully study this topic.Even though I raised questions of balanced development in the topics of substantial economy, virtual economy, underestimated factor price and income allocation;even though I proposed the drawing up currency policy needed to take the 15 variables such as commodity price, asset price, exchange rate, borrowing rate and interest rate into consideration;even though I suggested that the domestic inherent unbalanced economic growth impacted by external economic fluctuation in 10 years, including Breach of Contract by Developed Countries in 1989, the Southeast Asian Financial Crisis in 1997 and Subprime Mortgage Crisis in 2007;even though I raised that before drawing up Policies, Acts，Amendments, Abolition, prior assessment regarding how they will affect the economy and society is highly recommended, I did not go in depth to research the problem or obtain the consistent research findings due to the time constraints, the limited research approaches, the difficulty of collecting economics data and the uncertainty in the analytic framework.These problems even existed at the finalization of the project and became the emphasis of my future research and study.

I have given explanation and held discussion regarding the projects analytic framework and questions in the masters and doctoral courses in the Center for Law and Economics of China University of Political Science and Law in Law School, and master courses of Civil and Commercial Law School and the China EU School of Law.My students showed interests in, from the viewpoint of law and economics, studying the correlation between economic stability/financial stability and legal institution, studying the strategies to maintain domestic economic stability and financial stability with the help of legal institution and the analytic methodology combining positive analysis and normative analysis.They also raised questions and offered opinions and suggestions.

During the course of building framework and researching of this project, Professor Guangdong Xu, Professor Jiye Hu, Professor Qing Zhang, Associate Professor Binwei Gui, Dr.Wenjing Li, Dr.Tianshu Zhou and Dr.Wenming Xu from the Center for Law and Economics of China University of Political Science and Law have given me pertinent opinions and advice to my research.After finishing the script, Ph.D.candidates Xiuyao Wu of class 2012, Ming Hu, Jinyu Du, Ertan Gao of class 2013, Jianwei Chen, Shiting Feng of class 2015, M.A.candidates Xinqi Dai, Ting Hu and Biao Wen participated in the discussion and revision from 1st script to 3rd script.Min Liang, the academic secretary from the Center for Law and Economics of China University of Political Science and Law, has done a great deal of coordination for the discussion, revision and publication for this project.I cannot thank them enough for their work and contribution to my project.

Thanks to the editors of China Renmin University Press.They found and corrected many mistakes in my script with a high degree of professionalism and responsible editing work, which enabled it to be published in high quality.

I am responsible for the problems and mistakes in my book.

I would like to express my gratitude to National Planning Office of Philosophy and Social Science, who funded the publication of this book.

Xi Tao

At China University of Political Science and Law in Beijing

Mar 6th,2016