From 1978, China took a great turn to adopt a reformative and open-door policy. Numerous laws and regulations also have been adopted to encourage foreign investments and domestic economic reforms backed up by unflagging economic development since the declaration of introduction of a market economy in October 1992. The Company Law of the Peoples Republic of China enacted in December 1993 prescribes only the form of a limited liability company and a joint stock limited company in order to incorporate the pre-existing stated-owned enterprises.

A joint stock limited company has a shareholders general meeting, board of directors and supervisory board. The principle of checks and balance operates among these entities in the way that each entity respects the rights and obligations of the others while holding each other in check. A limited liability company also has a shareholders meeting, board of directors and supervisory board, and thus there is no much deviation from the organizational structure of a joint stock limited company except that the structure of the former is simplified and very flexible. The reason is that most limited liability companies were converted from the state-owned enterprises and organizations funded by the government.

Both the limited liability company and joint stock limited company, as compared with Korean counterparts, have some distinctions: one point is that the chairman of the board of directors and manager have the power to execute company matters, the other being that the representative of workers of the company take their seats in the supervisory board which functions as a body of comprehensive conference. On the other hand, a Korean limited liability company has a partners general meeting and directors, but has neither a board of directors nor a representative director.

Since the history of modern Chinese laws is not long, the society still has to endure a great deal of problems in the legislation process. Thus, China should demonstrate its willingness to refer to advanced foreign legislations to establish a desirable organizational structure of company that can guarantee the transparency of management and democratic operation of company. In this context, the currently revised Commercial Act and Securities and Exchange Act of Korea will serve as a good reference.