The capacity of a legal system to protect property rights is generally considered one of the most important factors in economic development because commercial transactions will become unduly costly and risky in an environment in which contracts cannot be enforced by the state. An independent judiciary, in turn, is generally considered an essential element of an effective legal system and thus necessary for sustained economic growth. Chinese leaders have clearly recognized the critical importance of building a legal infrastructure that will facilitate commercial transactions in an increasingly market-oriented economy; they have also acknowledged the need to enhance the competence, authority, and independence of the judiciary. Yet scholars remain divided on the role of the legal system in development and how well it protects property rights.

How well then is China implementing the declared policy of “ruling the country according to the law”? How are Chinese citizens and corporations responding to the new legal environment? What strategies do they use to win favorable outcomes in court? How independent are the courts in handling commercial cases? What are the sources and impact of outside influence in such cases? How do the parties assess the legal system and their experience in court? This chapter sheds light on these important issues by measuring various aspects of the civil proceedings in basic level and intermediate courts in one of China's leading urban commercial centers.