Contracts
in sentence
728 examples of Contracts in a sentence
China’s Evolving WebHONG KONG – In a recent article, the economist Axel Leijonhufvud defines the market system as a web of
contracts.
Because
contracts
are linked with each other, one default can trigger an avalanche of broken promises, “[making] it possible to destroy virtually the entire web of formal and informal
contracts
which the market system requires for its functioning.”
The state’s role is to protect, enforce, and regulate these
contracts
and related property rights, as well as to intervene to prevent systemic failure.
This web of
contracts
– often taken for granted in mainstream economics, to the extent that it becomes almost invisible – embodies the formal and informal rules embedded in the market system that shape and constrain individual and social behavior.
Advanced economic systems have very complex webs of contracts, such as financial derivatives.
This is because “[t]he web of
contracts
has developed serious inconsistencies.”
To insist that all
contracts
be fulfilled would “cause a collapse of very large portions of the web,” with “serious economic and incalculable social and political consequences.”
Under China’s planned economy, most
contracts
were between individuals and the state, whereas more sophisticated market
contracts
have emerged or re-emerged only over the last 30 years.
Indeed, the widespread use of market
contracts
with publicly-owned companies was a recent and important adaptation in the move toward a “socialist market economy.”
The web of contracts, however, can also be understood as complex adaptive market systems, which encompass the state and family relations as well.
To understand China’s socialist market economy, it is essential to examine systematically these different forms of
contracts
and their institutional structures.
Family and kinship contracts, which govern marriage, adoption, cohabitation, inheritance, etc., form the basic unit of human society.
These
contracts
are the most ancient and remain the foundation of social relationships in China today.
Corporate
contracts
place the profit-oriented legal person at the center of the transaction and bind all of its stakeholders.
Chinese corporate
contracts
have grown exponentially over the last 30 years, but they have special characteristics that reflect the primary role of Chinese state-owned enterprises.
Market
contracts
between producers and consumers – and/or among producers in supply chains – link individuals, families, firms, governments, and public organizations through local or global markets.
Non-governmental and non-profit civil
contracts
bind people together for communal, religious, social, and political activities.
These
contracts
are still relatively new and evolving in China.
Deciphering the structure of the web of
contracts
holds the key to understanding how an economy behaves, including its dynamic non-linear adaptation to internal and external forces.
This means that we should view the economy and society not as rigid hierarchies or mechanical markets, but as networks or webs of life, in which contracts, formal and informal, fulfilled or violated, are the essence of human activity.
Examining webs of
contracts
should be similar to a biologist’s examination of cell structure and DNA.
China has created four functioning global-scale modern supply chains in manufacturing, infrastructure, finance, and government services, thanks to its evolving, expanding, and complex web of
contracts.
But how was China able to build a modern industrial base within a relatively short period of time from its traditional, patrimonial family
contracts
and archaic constitutional structures?
This “top-level governance architecture,” as it is known in China, has been essential for coordinating and orchestrating the different supply chains and the overall web of
contracts
to achieve the delicate balance among individual, family, corporate, social, and national objectives.
How it is shaped will depend on how China’s history, culture, institutional context, and evolving web of
contracts
affect the country’s social fabric.
The regulators are focusing on an important feature of derivatives
contracts
that allows the derivatives industry to close out their dealings abruptly with a financially distressed entity, thereby making the institution incapable of recovering.
But, though US bankruptcy law usually does a good job of restructuring industrial firms, it cannot restructure financial firms, because bankruptcy’s basic rules – which allow the court to consolidate the firm’s assets, redeploy them, and sell the rest – do not apply to most financial contracts, like derivatives.
But, ominously, it could not sell its large portfolio of derivatives
contracts
– deals based on movements of interest and currency rates.
The derivatives market is exempt from rules that stop creditors from grabbing collateral and terminating their
contracts
when the debtor files for bankruptcy.
US regulators, for example, cannot first try bankruptcy before deploying their expanded powers under the 2010 Dodd-Frank financial-reform legislation; if they did, the bankrupt firm’s counterparties in the derivatives and repo markets would close out their
contracts
and dump their collateral as soon as they could.
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