This article attempts to show the formation of the legal system in China. Author aims to give the answer to the question whether the Chinese legal system tends to codification of the law, or is rather more similar to the common law systems. The article presents the process of formation of the PRC legal system in historical perspective, identifies the main foundations of the current Chinese legal system, sources of law, and the rules governing the legal system of China. Later in the article author presents the genesis of the reception of Western model of law and attempts to indicate the scope of the discretionary power of judges in applying the law. In conclusion the author states that the PRC legal system is a hybrid system, referring to both the positive law, as well as the common law system. The author, however, is inclined towards the concept that currently in practice, the predominant role is played by law in action-an interpretation of law made by judges resolving the individual case.