Taobao, Federalism, and the Emergence of Law, Chinese Style

Developing countries grapple with the challenge of establishing legal and institutional infrastructure to support efficient markets, such as securing property rights and the rule of law. The historic path for the West involved parliaments and independent judiciaries that constrained the ruler, while China's path diverged significantly. In this chapter, the authors highlight how private actors are crafting new institutional rules in China, either with the state’s acquiescence or explicit endorsement. Taobao—China’s dominant online trading platform with over seven hundred million users—is not simply an exchange platform, but one in the process of developing a modern private legal system that enforces contracts, resolves disputes, and prevents fraud. As a private supplier of market legal infrastructure when formal institutions are lacking, Taobao essentially provides a means for creating “law, Chinese style.”