China Companies and Investment – The Balance between Domestic and International Concerns

Abstract

China is a major recipient of foreign investment and has become a major investor internationally. Its active participation in international treaties relating to investment, in the form of bilateral investment treaties and, more recently, free trade agreements, when combined with the outward push by Chinese companies (particularly state-owned enterprises) has attracted considerable interest and commentary internationally. China is actively engaged in adjusting and coordinating its policies towards investment - domestically in the form of amendments to the Foreign Investment Industries Catalog and policies designed to widen access of private capital to investment opportunities within China, and externally in the form of policies designed to extend the scope of government regulation and to encourage further outbound investment, particularly by private Chinese companies. These Chinese policies do not just affect China.

The purpose of this article is to examine and analyze China’s policies, treaty commitments and laws and regulations in relation to inbound and outbound investment, with a particular focus on changes in China’s approach since 2008. The paper concludes that the substantial amount of regulation issued by various parts of the Chinese government demonstrate a continuing determination to direct investment and control expansion by the private sectors, both foreign and Chinese. This determination to control investment policy extends to outbound investment. Although Chinese policy demonstrates an awareness of, and some effort to react to, international responses to its policies at home and abroad, these responses have only a limited impact on its decisions on investment. These policies carry with them a number of practical problems.

Keywords: China, investment, FDI, private sector, investment overseas, rare earths, bilateral investment treaties, free trade agreements

JEL Classification: F02, F10, F20, F30, F40