Environmental Policy and Compensation in China: An Empirical Analysis of Article Eight of the Chinese Administrative License Law

Abstract

In the past few years, China has implemented environmental policies that negatively affected the property interests of numerous private enterprises. This article offers the first systematic analysis of how China compensates enterprises for losses caused by the implementation of environmental laws and policies. It generates descriptive statistics on the characteristics of the compensation cases and finds that in a majority of the cases, the court allowed the government to set compensation below the value of the enterprise’s investment. Statistics also show that China offers weaker protection for private enterprises against newly adopted environmental policies compared to other types of rules or policies, allowing the government to close highly polluting enterprises with relatively low compensation. This article then offers an explanation of the courts’ approach and considers whether Chinese courts achieve an appropriate balance between property protection and policy flexibility.