Chapter 18: China’s International Investment Policy: Formation, Evolution, and Transformation(s)

in International Investment Treaties and Arbitration Across Asia
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Since China adopted its ‘open door’ policy in 1978, which altered its development strategy from self-sufficiency to active participation in the world market and aimed at attracting foreign investment to fuel its economic development, the underlying policy for mobilising inward foreign direct investment (fdi) remains unchanged to date: to assist the readjustment of China’s economy; to coordinate its modernisation programs; and to improve its quality of life. With the 1997 launch of the ‘going global’ policy, an outward focus regarding foreign investment has been added, to circumvent trade barriers and improve the competitiveness of Chinese firms, typically its state-owned enterprises (soes). In order to accommodate inward and outward fdi, China’s participation in the international investment regime has underpinned its efforts to join multilateral investment-related legal instruments and conclude international investment agreements (iias). Because of its bitter history of signing ‘unequal treaties’, unlike other countries China’s participation in the international investment regime did not start with the conclusion of Friendship, Commerce and Navigation (fcn) treaties. Instead, it started by selectively concluding bilateral investment treaties (bits) with developed countries (major capital-exporting states to China at that time), signing its first bit with Sweden in 1982. Despite being a latecomer, over time China’s experience and practice with the international investment regime have allowed it to evolve towards liberalising its iias regime and balancing the duties and benefits associated with iias. This chapter posits that China is deploying its international investment policy on three levels, namely, bilateral (in the form of bits), regional (in the form of free trade agreements including investment matters), and global (such as the recent ‘belt and road’ initiative and G20 participation). Against the backdrop of domestic law reforms, the chapter explores each of these tracks with regard to the level of investment protection and liberalisation with the objective of identifying the extent to which China has been coherent in its policy-making.

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