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What We Do and Do Not Know About Standard Form Contracts? An Empirical Study of Wealth Management Product Contracts in China

Published online by Cambridge University Press:  23 November 2021

Qin Zhou
Affiliation:
Faculty of Law, National University of Singapore, Singapore, Singapore
Jing Feng*
Affiliation:
School of Law, Southwest University of Political Science and Law, ChongqingChina
*
Corresponding author. E-mail: jingfeng2@swupl.edu.cn
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Abstract

Wealth management products have been popular investment vehicles in China, and they are governed by standard form contracts. Existing studies mainly focus on the risk of such products and suggest having special laws to provide more protection for customers. Little is known about the actual contents of wealth management product contracts. Based on 66 hand-collected wealth management product contracts from major Chinese commercial banks, this article tries to explore the contractual relationship between giant banks and individual customers. It also tests the exploitation theory in a Chinese context by analysing whether the wealth management product contracts are more pro-seller or pro-buyer relative to the laws and regulations in China. Our findings reinforce the argument that standard form contracts are designed in favour of the sellers. The wealth management product contracts are tilted toward the commercial banks relative to the default rules. These contracts contain massive clauses that limit banks’ liabilities and restrict customers’ choice of conflict resolution mechanisms. However, a counter-intuitive finding is that national commercial banks provide less pro-seller terms than the local ones. We argue that the explanations for such variation in contract practices among Chinese commercial banks lie in the enforcement of relevant laws and regulations and the unique nature of national commercial banks.

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Article
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Copyright © The Author(s), 2021. Published by Cambridge University Press on behalf of the National University of Singapore

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References

1 Schwartz, Alan & Wilde, Louis L, ‘Intervening in Markets on the Basis of Imperfect Information: A Legal and Economic Analysis’ (1979) 127 University of Pennsylvania Law Review 630CrossRefGoogle Scholar.

2 Rakoff, Todd D, ‘Contracts of Adhesion: An Essay in Reconstruction’ (1983) 96 Harvard Law Review 1173CrossRefGoogle Scholar (arguing that ‘enforcing boilerplate terms trenches on the freedom of the adhering party’).

3 Slawson, David W, ‘Standard Form Contracts and Democratic Control of Lawmaking Power’ (1971) 84 Harvard Law Review 529CrossRefGoogle Scholar (questioning the existence of necessary consents when using standard form contracts because recipients ‘could not reasonably be expected to read or understand’ the contracts).

4 Meyerson, Michael I, ‘The Efficient Consumer Form Contract: Law and Economics Meet the Real World’ (1990) 24 Georgia Law Review 583Google Scholar (arguing that most of the standard form contracts ‘allocate risks to the consumer’).

5 Lin Lin, ‘Contractual Innovation in China's Venture Capital Market’ (2020) 21 European Business Organization Law Review 101 (mentioning that ‘[t]here is little empirical work examining contractual innovation in the context of China’ and providing empirical evidence for understanding Chinese venture capital's contracting practice.).

6 Pan Xiuping & Wang Weiguo, ‘Legal Problems Concerning Bank-issued Wealth Management Products [shangye yinhang licai chanpin ruogan falv wenti tantao]’ (2009) 32 Modern Law Science [Xiandai Faxue] 60; Shen Wei, ‘Wealth Management Products in the Context of China's Shadow Banking: Systemic Risks, Consumer Protection and Regulatory Instruments’ (2015) 23 Asia Pacific Law Review 91.

7 Yan Su, ‘Research on the Principle of Standardization of Information Disclosure of Commercial Bank Financing Products [yinhang licai chanpin xinxi pilu biaozhunhua yuanze de lifa yanjiu]’ (2015) 3 Law Science Magazine [Faxue Zazhi] 79.

8 Huo Bin, ‘Empirical Analysis on the Risks of Wealth Management Products [yinhang licai chanpin fengxian de shizheng yanjiu – jiyu shandongsheng 2011–2013 nian de licai chanpin shuju]’ (2014) 35 Dong Yue Tribune [Dongyue Luncong] 83.

9 Bank Wealth Management Product Registration Center, ‘China Banking Financial Market Report 2017 [zhongguo yinhangye licai shichang baogao]’ <www.chinawealth.com.cn/resource/830/846/863/51198/52005/2150127/15184294380932125823274.pdf> accessed 1 Mar 2018.

10 Li Xiang, ‘Specific Legislation to Rectify the Chaos of Financial Product Market [zhuanmen lifa zhengzhi jinrong licai chanpin yingxiao luanxiang]’ (npc.people.com.cn, 10 Feb 2015) <http://npc.people.com.cn/n/2015/0210/c14576-26538065.html> accessed 1 Mar 2018.

11 These SOCBs include Agricultural Bank of China, Bank of China, Industrial and Commercial Bank of China, China Construction Bank, Industrial and Commercial Bank of China, and Postal Savings Bank of China.

12 These JSCBs include China Bohai Bank, China CITIC Bank, China Everbright Bank, China Guangfa Bank, China Merchants Bank, China Minsheng Bank, China Zheshang Bank, Huaxia Bank, Industrial Bank, Ping An Bank, and Shanghai Pudong Development Bank.

13 These UCBs include but are not limited to Bank of Beijing, Bank of Hangzhou, Bank of Jiangsu, Bank of Ningbo, and Bank of Shanghai.

14 These RCBs include but are not limited to Xiaoshan Rural Commercial Bank, Chengdu Rural Commercial Bank, and Jiangsu Sheyang Rural Commercial Bank.

15 Hugh Collins, ‘Harmonisation by Example: European Laws against Unfair Commercial Practices’ (2010) 73 Modern Law Review 89 (examining the impact of the European Union's Directive on Unfair Commercial Practice on the enforcement of the contract law and tort law in the United Kingdom, which aim at protecting consumers from unfair contract terms); Florencia Marotta-Wurgler, ‘What's in a Standard Form Contract? An Empirical Analysis of Software License Agreements’ (2007) 4 Journal of Empirical Legal Studies 677 (finding that among a sample of 647 end-user license agreements (EULAs) collected from 598 software companies running business in the United States, almost all license agreements are biased to favor sellers); Daniel Schwarcz, ‘Reevaluating Standardized Insurance Policies’ (2011) 78 University of Chicago Law Review 1263 (reevaluating the homeowners insurance policies in the United States, and concluding that a majority of such policies decrease the amount of insurance coverage).

16 See Marotta-Wurgler, ‘What's in a Standard Form Contract?’ (n 15) 713 (concluding that in the software industry, ‘larger and (controlling for size) younger firms tend to have more pro-seller [EULA] terms than smaller and older companies’).

17 George G Bogert & Eli E Fink, ‘Business Practice Regarding Warranties in the Sale of Goods’ (1930) 25 Illinois Law Review 400; Friedrich Kessler, ‘Contract of Adhesion—Some Thoughts about Freedom of Contract’ (1943) 43 Columbia Law Review 629; William C Whitford, ‘Law and the Consumer Transaction: A Case Study of the Automobile Warranty’ (1968) Wisconsin Law Review 1006.

18 William L Prosser, ‘The Implied Warranty of Merchantable Quality’ (1943) 27 Minnesota Law Review 117.

19 David W Slawson, ‘Mass Contracts: Lawful Fraud in California’ (1974) 48 South California Law Review 12.

20 Bogert & Fink, ‘Business Practice Regarding Warranties in the Sale of Goods’ (n 17) 411.

21 Friedrich Kessler, ‘Forces Shaping the Insurance Contract’ (1954) 14 University of Chicago Conference Series 9.

22 Whitford, ‘Law and the Consumer Transaction: A Case Study of the Automobile Warranty’ (n 17) 1059.

23 See Marotta-Wurgler, ‘What's in a Standard Form Contract?’ (n 15) 711 (finding that ‘[l]arger firms are more likely to have more restrictive terms defining the scope of the license, limitations of liability, and conflict resolution’).

24 ibid 713.

25 Slawson, ‘Standard Form Contracts and Democratic Control of Lawmaking Power’ (n 3) 548–49 (arguing that small percentage declines in sales will raise producers’ attention); George L Priest, ‘A Theory of the Consumer Product Warranty’ (1981) 90 Yale Law Journal 1297, 1347 (arguing that ‘[i]f a small group of consumers reads warranties and selects among products according to warranty content, manufacturers may be forced to draft warranties responsive to group's preferences’).

26 Priest, ‘A Theory of the Consumer Product Warranty’ (n 25) 1346–1347 (arguing that manufactures may adjust the warranties to attract a set of marginal consumers).

27 ibid 1347.

28 Melvin Aron Eisenberg, ‘The Limits of Cognition and the Limits of Contract’ (1995) 47 Stanford Law Review 221; Rakoff, ‘Contracts of Adhesion: An Essay in Reconstruction’ (n 2) 1227.

29 Alan Schwartz & Louis L Wilde, ‘Imperfect Information in Markets for Contract Terms: The Examples of Warranties and Security Interests’ (1983) 69 Virginia Law Review 1387.

30 Robert A Hillman & Jeffrey J Rachlinski, ‘Standard-Form Contracting in the Electronic Age’ (2002) 77 New York University Law Review 429; Stephen J Ware, ‘Comment, A Critique of the Reasonable Expectations Doctrine’ (1989) 56 University of Chicago Law Review 1461.

31 Hetongfa (合同法) [Contract Law of the People's Republic of China] (promulgated by the 2nd Meeting of the 9th National People's Congress, 15 March 1999, effective 1 October 1999).

32 ibid arts 39, 40 and 41.

33 Xie Gen, ‘Specification System for Contents of Standard Terms [geshi tiaokuan neirong guizhi de guifan tixi]’ (2013) 2 Chinese Journal of Law [Faxue Yanjiu] 102.

34 Ma Yide, ‘Recognizing the Validity of Exception Clauses [mianchu huo xianzhi zeren geshi tiaokuan de xiaoli rending]’ (2014) 11 Law Science [Faxue] 146.

35 Huang Yanqing, ‘Arbitrary Terms Frequently Appear in the Sale of Bank-issued Wealth Management Product [yinhang licai chanpin pinxian bawang tiaokuan]’ (www.ce.cn, 8 Mar 2010) <http://finance.ce.cn/rolling/201008/03/t20100803_16037388.shtml> accessed 18 Aug 2020; Zhang Xin, ‘The Standard Terms of Bank-issued Wealth Management Products Are Arbitrary: One Contract Contains Ten Unilateral Privileges [yinhang licai chanpin geshi tiaokuan tai badao: yifen hetong jing baocang shixiang danfangmian tequan]’, Securities Daily [Zhengquan Ribao] (19 May 2015) <http://epaper.zqrb.cn/html/2015-05/19/content_76553.htm> accessed 18 Aug 2020.

36 For a detailed discussion about the relevant law and regulation on WMPCs, see Section II in this article.

37 See Guo Li & Wen Xin, ‘The Assignment of Bank's and Client's Obligation in Personal Wealth Management Products: An Analysis Framework Based on Differentiating Products and Contractual Relationship [geren licai yewu zhong yinhang he kehu de yiwu peizhi: jiyu chanpin he qiyue leixing chayixing de fenxi kuangjia]’ (2010) 7 Finance Forum [Jinrong Luntan] 20; Chen Xuewen, ‘Investor Protection in the Context of Commercial Banks’ Non-guaranteed Wealth Management Products [shangye yinhang feibaoben licai yewu de touzizhe falv baohu]’ (2012) 7 Political Science and Law [Zhengzhi yu Falv] 90.

38 Yan, ‘Research on the Principle of Standardization of Information Disclosure of Commercial Bank Financing Products’ (n 7) 80.

39 ibid 81–83.

40 Shen, ‘Wealth Management Products in the Context of China's Shadow Banking’ (n 6) 110; Li Lixin, ‘Disclosure in the Sale of Bank-issued Wealth Management Products and the Informed Customers [lun yinhang licai chanpin xiaoshou zhongde gaozhi yu zhixiao]’ (2013) 10 Hebei Law Science [Hebei Faxue] 141.

41 Shen, ‘Wealth Management Products in the Context of China's Shadow Banking’ (n 6) 108–110.

42 China Banking Regulatory Commission has been merged into China Banking and Insurance Regulatory Commission (CBIRC) in 2018.

43 Shangye Yinhang Geren Licai Yewu Guanli Zanxing Banfa (商业银行个人理财业务管理暂行办法) [Interim Measures for the Administration of Personal Wealth Management Business of Commercial Bank] (promulgated by the China Banking Regulatory Commission, 24 Sep 2005, effective 1 Nov 2005).

44 ibid art 1.

45 Shangye Yinhang Licai Chanpin Xiaoshou Guanli Banfa (商业银行理财产品销售管理办法) [Measures for the Administration of the Sale of Wealth Management Products of Commercial Banks] (promulgated by the China Banking Regulatory Commission, 28 Aug 2011, effective 1 Jan 2012).

46 Shangye Yinhang Xinxi Pilu Banfa (商业银行信息披露办法) [Measures for Information Disclosure of Commercial Banks] (promulgated by the China Banking Regulatory Commission, 3 Jul 2007, effective 3 Jul 2007); Shangye Yinhang Shengyu Fengxian Guanli Zhiyin (商业银行声誉风险管理指引) [Guidelines on Commercial Banks’ Management of Reputational Risks] (promulgated by the China Banking Regulatory Commission, 25 Aug 2009, effective 25 Aug 2009).

47 Measures for the Administration of the Sale of Wealth Management Products of Commercial Banks (n 45) art 11(2).

48 ibid art 6.

49 ibid art 13.

50 ibid art 18(4)–(7).

51 ibid art 20.

52 ibid art 21.

53 ibid art 25.

54 ibid art 19.

55 ibid art 16.

56 ibid art 14(1).

57 ibid art 17.

58 ibid art 18(2).

59 ibid art 14 and 15.

60 See e.g, Zheng Yangpeng, ‘China's Minsheng Bank Sees Investor Trust Vanish – Along with 3b Yuan’, South China Morning Post (18 Apr 2017) <http://www.scmp.com/business/banking-finance/article/2088620/chinas-minsheng-bank-sees-investor-trust-vanish-along-3b> accessed 20 Jan 2019.

61 See e.g, Guanyu Guifan Jinrong Jigou Zichan Guanli Yewu de Zhidao Yijian (关于规范金融机构资产管理业务的指导意见) [Guiding Opinions on Regulating the Asset Management Business of Financial Institutions] (promulgated by the People's Bank of China, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission and State Administration of Foreign Exchange, 27 Apr 2018, effective 27 Apr 2018) (providing guiding opinions to the issues of unregulated asset management business, multi-layered nesting, rigid repayment and many others); Shangye Yinhang Licai Yewu Jiandu Guanli Banfa (商业银行理财业务监督管理办法) [Measures for the Supervision and Administration of the Wealth Management Business of Commercial Banks] (promulgated by the China Banking and Insurance Regulatory Commission, 26 Sep 2018, effective 26 Sep 2018) (requesting banking regulators to conduct penetrated, comprehensive and dynamic supervision of the WMP business).

62 Leng Jing & Shen Wei, ‘The Evolution of Contract Law in China: Convergence in Law but Divergence in Enforcement?’, in Yun-chen Chang, Wei Shen, & Wen-yeu Wang (eds), Private Law in China and Taiwan: Legal and Economic Analyses (Cambridge University Press 2016).

63 Contract Law (n 31) art 53.

64 ibid art 41.

65 Zhonghua Renmin Gongheguo Minfa Zongze (中华人民共和国民法总则) [General Provisions of the Civil Law of the People's Republic of China] (promulgated by the 5th Meeting of the 12th National People's Congress, 15 Mar 2017, effective 1 Oct 2017).

66 Zhonghua Renmin Gongheguo Xiaofeizhe Quanyi Baohu Fa (中华人民共和国消费者权益保护法) [Law of the People's Republic of China on the Protection of Consumer Rights and Interests] (promulgated by the 4th Meeting of the Standing Committee of the 8th National People's Congress, 31 Oct 1993, amended on 27 Aug 2009 and 25 Oct 2013, effective 15 Mar 2014), arts 2 and 28.

67 See paragraphs 2 to 4 in this section.

68 Measures for the Supervision and Administration of the Wealth Management Business of Commercial Banks (n 61) art 26. Similar rules can be found in articles 14 and 16 of the 2012 Measures.

69 Bank Wealth Management Product Registration Center, China Banking Financial Market Report 2017 [zhongguo yinhangye licai shichan baogao (2017)] (Bank Wealth Management Product Registration Center, 2 Feb 2018) <www.chinawealth.com.cn/resource/830/846/863/51198/52005/2150127/15184294380932125823274.pdf> accessed 1 Mar 2018.

70 One of us collected the 66 sampled WMPCs in late 2016 and early 2017, either through personal connections or by visiting banks in person. Not all of the banks that visited were willing to give WMPCs.

71 Zhonghua Renmin Gongheguo Shangye Yinhang Fa (中华人民共和国商业银行法) [Law of the People's Republic of China on Commercial Banks] (promulgated by the 13th Meeting of the Standing Committee of the 8th National People's Congress, 10 May 1995, amended on 27 Dec 2003 and 28 Aug 2015, effective 1 Oct 2015), art 13 sets 1 billion RMB as the minimum amount of registered capital for establishing a national commercial bank. This standard is hardly applicable considering the fact that most of the commercial banks have more than 1 billion RMB registered capital. For the purpose of this study, we add one more condition to the capital requirement, which is put into consideration of the regional factor. A national commercial bank in this study is the one who has at least 1 billion RMB registered capital and runs business around the country.

72 National Institution for Finance & Development, ‘Tracking Bank Wealth Management Products [yinhang licai shichang yunzuo baogao]’ (2017) 1 The Chinese Banker [Yinhangjia] 129 (describing that the WMPs issued by national commercial banks had taken up more than 30% of the total number of newly issued products and consisted of more than 70% of the raised funds in the end of 2016).

73 This doesn't mean urban commercial banks and rural commercial banks don't have branches cross provinces but compared to the large scale commercial banks and joint-equity commercial banks whose branches are almost around the country, they don't have such nationalized business map.

74 Location and number of local banks included in the sample. Shandong (11), Zhejiang (7), Jiangsu (6), Fujian (4), Hebei (3), Guangdong (3), Liaoning (2), and the other provinces in the sample (1).

75 For example, the money raised from WMPs issued by foreign commercial banks only consisted of 1.25% of the total amount of fundraising via sale of bank-issued WMPs in 2017. And such ratio has declined to 0.45% in 2018.

76 Zhonghua Renmin Gongheguo Waizi Yinhang Guanli Tiaoli (中华人民共和国外资银行管理条例) [Regulation of the People's Republic of China on the Administration of Foreign-funded Banks] (promulgated by the 155th Executive Meeting of the State Council, 8 Nov 2006, amended on 29 Jul 2014, 27 Nov 2014 and 30 Sept 2019, effective 30 Sept 2019).

77 The products sold under the same series share the similar WMPC.

78 Tracing the records from the website of China Construction Bank, the earliest time ‘Qian Yuan (乾元)’ was issued to the customers was April 21, 2011. For detailed information, visit <www.ccb.com/cn/finance/product.html> accessed 7 Jul 2021.

79 For example, among all the WMP sold from China Construction Bank in Beijing, 949 out of 972 are sold under ‘Qian Yuan’.

80 All commercial banks are required to disclose information of their WMPs on chinawealth website. The number is different from the annual report conducted by the Bank Wealth Management Product Registration Center because we searched the banks that issued WMPs to raise funds in 2017, while the center reported the cumulative number of banks that still had to pay off their WMPs.

81 Measures for the Administration of the Sale of Wealth Management Products of Commercial Banks (n 45) art 11.

82 Almost all state-owned banks were founded to support industrial development in the planned economy era, so they are old-line. For example, the oldest one is Bank of Communications, which was founded in 1908. Then the Bank of China was founded in 1912. Agricultural Cooperative Bank was founded in 1951, which was the predecessor of Agricultural Bank of China. Then in 1954, China Construction Bank began its business. The youngest among the five state-owned banks is the Industrial and Commercial Bank of China, who began its business in 1984.

83 The dummy variable is used to represent whether a commercial bank is public listed or not, it equals to 1 if a bank is public listed, and it equals to 0 if not.

84 Shehui Xinyong Tixi Jianshe guihua Gangyao (2014–2020) (社会信用体系建设规划纲要(2014–2020年)) [Panning Outline for the Construction of a Social Credit System (2014–2020)] (issued by the State Council, 14 Jun 2014, effective 14 Jun 2014) (explaining that establishment of the National Enterprise Credit Information Publicity System is an essential part of State Council's plan on constructing the social credit system).

85 Qiye Xinxi Gongshi Zanxing Tiaoli (企业信息公示暂行条例) [Interim Regulation on Enterprise Information Disclosure] (promulgated by the 57th Executive Meeting of the State Council, 23 Jul 2014, effective 1 Oct 2014) art 8 requests enterprises to submit their annual report to administration for industry and commerce through the enterprise credit information disclosure system; art 10 lists the information that shall be updated within 20 working days when such information is changed.

86 See Marotta-Wurgler, ‘What's in a Standard Form Contract?’ (n 15); Theodore Eisenberg & Geoffrey P Miller, ‘The Flight to New York: An Empirical Study of Choice of Law and Choice of Forum Clauses in Publicly-Held Companies’ Contracts’ (2009) 30 Cardozo Law Review 1475.

87 Measures for the Administration of the Sale of Wealth Management Products of Commercial Banks (n 45) art 18(9).

88 ibid art 20(1).

89 See Marotta-Wurgler, ‘What's in a Standard Form Contract?’ (n 15) 692–693 (providing detailed description of methodology for tracking the bias of 23 end user license agreement terms).

90 ibid 691 (creating the phrase ‘bias index’ to describe the overall result of the bias of end user license agreements).

91 Measures for the Administration of the Sale of Wealth Management Products of Commercial Banks (n 45) art 13. This article also lists the languages that shall be used cautiously.

92 ibid art 16 (requiring a bank to provide scientific and reasonable estimation methods if its WMPC contains languages meaning ‘rate of return’).

93 ibid art 20 (requiring a WMPC to specify the information regarding investment, such as the investment scope, type, proportion, and floating ratio).

94 ibid art 21 (requiring a WMPC to specify the conditions, rates, methods of sales fee, management fee, and other fees).

95 ibid arts 18(5), (6), and (7) (listing three types of bank-issued WMPs: WMPs with guaranteed income, WMPs with safeguarded principal and floating income, and WMPs with non-safeguarded principal and floating income. Each type has its own unique statement to describe the characteristics of the WMP.

96 Shen, ‘Wealth Management Products in the Context of China's Shadow Banking’ (n 6) 105 (arguing that the CBRC issued a notice to check the third-party WMPs sold through banks, because ‘without limits on the sector, defaults could risk contagion and trigger a liquidity or subprime crisis’).

97 Chapter Four of the 2012 Measures exclusively expresses the rules for the risk rating of WMPs, and Chapter Five specifies rules for the assessment of the risk tolerance of clients. There are other provisions that are relevant to risk disclosure in other parts of the 2012 Measures.

98 Measures for the Administration of the Sale of Wealth Management Products of Commercial Banks (n 45) art 18.

99 ibid arts 17 and 18(1), and (2) (requiring WMPCs to contain specific risk warning statement).

100 ibid art 18(4).

101 ibid art 24. In practice, the banks use PR1, PR2, PR3 PR4 and PR5 to represent the risk rating of WMPs. PR1 represents the lowest level of risk, while PR5 means the highest level of risk.

102 Shen Wei, ‘Regulating Complex Structured Financial Products and Its Improvement – Taking the Lehman Brothers Mini Bond Event in Hong Kong as the Starting Point [fuza jiegou jinrong chanpin de guizhi jiqi gaijin lujing – yi xianggang leiman mini zhaiquan shijian wei qierudian]’ (2011) 23 Peking University Law Journal [Zhongwai Faxue] 1297 (arguing that the increasing complexity of financial products may limit the effectiveness of information disclosures because financial institutions may lose the incentives to disclose massive information of the financial products as such disclosures increase operational costs).

103 Measures of the Administration of the Sale of Wealth Management Products of Commercial Banks (n 45) art 25.

104 Ben-Shahar Omri & Carl E Schneider, ‘The Failure of Mandated Disclosure’ (2011) 159 University of Pennsylvania Law Review 647, 789.

105 Measures of the Administration of the Sale of Wealth Management Products of Commercial Banks (n 45) art 19.

106 ibid art 39 (allowing banks to sell WMPs through phone, fax, text message and email).

107 ibid art 20(1).

108 ibid art 20(3) and art 21(2).

109 Pan & Wang, ‘Legal Problems Concerning Bank-issued Wealth Management Products’ (n 6) (arguing that it is a trend to allow pledge of the WMPs, and the characteristics of WMPs meet the requirements set by the Chinese property law); Wang Xiaodong, ‘Risks of Wealth Management Products Pledge Financing and the Countermeasures [shangye yinhang licai chanpin zhiya rongzi de fengxian ji duice]’ (2013) Commercial Times [Shangye Shidai] 29 (questioning the legality of allowing pledge of the bank-issued WMPs regarding the uncertainty of WMP investments).

110 Contract Law (n 31) art 117 (defining force majeure as ‘objective situations that are unforeseeable, unavoidable and unsurmountable’).

111 ibid.

112 ibid art 93 and art 94 (there are two reasons to terminate a contract: agreement (art 93) or statutory reason (art 94); art 94 also lists five situations under which one party is permitted to terminate the contract).

113 Measures of the Administration of the Sale of Wealth Management Products of Commercial Banks (n 45) art 20 and art 21 (allowing customers to redeem WMPs in advance if the customers refuse to accept banks’ adjustments in terms of investment portion, type of investment assets, and methods for charging fees).

114 The winning rate for customers through court is relatively low according to the current case results. The losing party also has to pay the litigation fee. Addition fees, such as the lawyer fee and travel fees, are also potential costs of a case.

115 Minshi Susongfa (民事诉讼法) [Civil Procedure Law of the People's Republic of China] (promulgated by the 4th Meeting of the 7th National People's Congress, 9 Apr 1991, amended on 28 Oct 2007, 31 Aug 2012, and 27 Jun 2017, effective 1 Jul 2017) art 34 (allowing parties to have a choice of forum between the location of the defendant's domicile, where the contract is performed or signed, the location of the plaintiff's domicile, the location of the subject matter or other locations which have actual connections with the dispute upon written agreement.

116 The maximum score 7 refers to the extremely buyer friendly WMPC; while -21 refers to the extreme pro-seller WMPC, which requested customers to take their own responsibilities for all the risks listed. In addition, one possible reason the range of possible scores is not centered at zero is that the Measures for the Administration of the Sale of Wealth Management Products of Commercial Banks was designed to primarily protect customers.

117 The skewness statistic was -0.326 (SE = 0.295) and the kurtosis statistic was -0.696 (SE= 0.582).

118 See Schwarcz, ‘Reevaluating Standardized Insurance Policies’ (n 15) 1263 (finding that ‘there is substantial variation among the top home-owners carriers with respect to numerous important policy terms’); Florencia Marotta-Wurgler & Robert Taylor, ‘Set in Stone? Change and Innovation in Consumer Standard-form Contracts’ (2013) 88 New York University Law Review 240 (finding that ‘[y]oung, large, and growing firms are also relatively more likely to have adopted the innovative terms by 2010’).

119 One-way repeated measures ANOVA analysis confirms the differences between these means as significant. For category 4 and 1, mean difference is -1.87, p<0.01; for category 4 and 2, mean difference is -1.95, p<0.01; for category 4 and 3, mean difference is -2.71, p<0.01; for category 4 and 5, mean difference is -1.63, p<0.01.

120 One-way repeated measures ANOVA analysis confirms the differences between these means as significant. For category 3 and 1, mean difference is 0.83, p<0.01; for category 3 and 2, mean difference is 0.75, p<0.01; for category 3 and 4, mean difference is 2.71, p<0.01; for category 3 and 5, mean difference is 1.07, p<0.01.

121 These characteristics include type of bank, age of bank, registered capital, net revenue, the percentage of State Council shares, the percentage of ministry shares, and two dummies indicating whether the commercial bank is publicly listed and whether its business is nationwide.

122 The residuals of the specifications obey the assumptions of least squares regression.

123 Type of bank is highly associated with registered capital (Eta=0.55, p>.05). In practice, registered capital depends on type of bank; national banks are required to register more capital than urban and rural banks. Thus, to avoid multi-collinearity, we identify type of bank as key independent variable and drop the registered capital from the regression analysis.

124 For analysis involving sub-index bias, we also conducted Ordinal regression analysis and got the same results.

125 Dai Zhezhe, ‘Listen to Legal Experts Say “Full Interest Calculation” [ting falv zhuanjia shuo “quane jixi”]’ People's Daily [Renmin Ribao] (26 Apr 2017) <http://data.people.com.cn/rmrb/20170426/19> accessed 10 May 2020; Qu Lingyan, ‘Bank Contracts Have Many One-Sided Clauses [yinhang hetong cun daliang bawang tiaokuan]’ Economic Information Daily [Jingji Cankao Bao] (19 Dec 2014) <http://dz.jjckb.cn/www/pages/webpage2009/html/2014-12/19/content_100308.htm?div=-1> accessed 10 May 2020.

126 For category 1, 2, and 4, the F tests indicated a bad model fit.

127 Marotta-Wurgler, ‘What's in a Standard Form Contract?’ (n 15) 703.

128 Michael N T Tan, Corporate Governance and Banking in China (Routledge 2013); Li Chen, ‘Holding “China Inc.” Together: The CCP and the Rise of China's Yangqi’ (2016) 228 The China Quarterly 927.

129 David Stanway, ‘China Investors in Rare Protest Accuse Regulators of ‘Ignoring Fraud’’ Reuters (21 Sep 2015) <https://www.reuters.com/article/us-china-fanya-protests-idUSKCN0RL0Z420150921> accessed 10 May 2020.

130 Shen, ‘Wealth Management Products in the Context of China's Shadow Banking’ (n 6) 104.

131 ibid 66–67 (describing three scandals involving Huaxia Bank, CITIC and CCB); Engen Tham, Matthew Miller and David Lague, ‘China's Leaders Fret Over Debts Lurking in Shadow Banking System’ Reuters (28 Dec 2017) <https://www.reuters.com/investigates/special-report/china-risk-shadowbanking/> accessed on 10 May 2020.

132 11 out of 17 sampled national commercial banks are cross-listed, while only 9 out of the 50 local commercial banks are listed companies, among which 7 are publicly listed in mainland and 2 are publicly listed in Hong Kong.

133 Paul B McGuinness & Kevin Keasey, ‘The Listing of Chinese State-Owned Banks and Their Path to Banking and Ownership Reform’ (2010) 201 The China Quarterly 125.

134 John C Coffee, ‘The Future as History: The Prospects for Global Convergence in Corporate Governance and Its Implications’ (1998) 93 Northwestern University Law Review 641.

135 Siegel, Jordan, ‘Can Foreign Firms Bond Themselves Effectively by Renting US Securities Laws?’ (2005) 75 Journal of Financial Economics 319CrossRefGoogle Scholar.

136 ibid 320.

137 Liebman, Benjamin L & Milhaupt, Curtis J, ‘Reputational Sanctions in China's Securities Market’ (2008) 108 Columbia Law Review 929Google Scholar.

138 Frank Tang, ‘China Sends Top Financial Officials to Clean Up Debt-laden Provinces Amid Growing Signs of Economic Risk’ South China Morning Post (30 Oct 2019) <https://www.scmp.com/economy/china-economy/article/3035521/china-sends-top-financial-officials-clean-debt-laden> accessed 10 May 2020.

139 Tuijin Puhui Jinrong Fazhan Guihua (2016–2020) (推进普惠金融发展规划 (2016–2020)) [Plan for Advancing the Development of Inclusive Finance (2016–2020)] (promulgated by the State Council, 31 December 2015, effective 15 January 2016); Guanyu Fangfan Huajie Jinrong Fengxian Yanshou Fengxian Dixian Gongzuo de Yijian (关于防范化解金融风险严守风险底线工作的意见) [Opinions on Preventing and Resolving Financial Risks and Rigorously Holding the Bottom Line Against Risk] (promulgated by the CBRC, 22 February 2016, effective 22 February 2016).

140 Liu Yujing, ‘China's Banking Regulator Slaps US$ 22 Million Fines on Six Banks’ South China Morning Post (7 Dec 2018) <https://www.scmp.com/business/banking-finance/article/2176991/chinas-banking-regulator-slaps-us22-million-fines-six-banks> accessed 10 May 2020.

141 Zhou Qin, ‘The Evolving Regulations on Bank-issued Wealth Management Products: from Market to State’ (2020) (Unpublished manuscript).

142 Wang Haisheng, ‘Lunching “Sending Law to the State-owned Enterprises” Campaigns [qidong “songfa jin guoqi” huodong]’ Procuratorate Daily [Jiancha Ribao] (2 Aug 2014) <http://newspaper.jcrb.com/html/2014-08/02/content_165132.htm> accessed 20 May 2020.

143 Stanley Lubman, ‘China's Exodus of Judges’ The Wall Street Journal (4 May 2015) <https://blogs.wsj.com/chinarealtime/2015/05/04/what-a-stubborn-exodus-of-judges-means-for-legal-reform-in-china/> accessed 20 May 2020.

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