Trakman, Leon --- "China and Foreign Direct Investment: Does Distance Lend Enchantment to the View?" [2013] UNSWLRS 73

Last Updated: 12 October 2013

China and Foreign Direct Investment: Does Distance Lend Enchantment to the View?

Leon Trakman, University of New South Wales

This paper is available for download at Available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2339389

Citation

This paper may be referenced as [2013] UNSWLRS 73.

Abstract

This article focuses on international investment law relating to China in general and to investor-state arbitration in particular. It has six key goals. First, it explores the extent to which China is subject to investor-state arbitration claims by inbound investors. Second, it considers the extent to which China’s investment treaty partners are involved in claims brought by outbound Chinese investors. Third, it discusses the significance of these two kinds of claims. Fourth, it evaluates the paucity of foreign direct investor claims against China, contrasted with growing claims by outbound Chinese investors against China’s treaty partner states. Fifth, it evaluates the assertion that China has failed to adequately liberalize its investment treaties and practices and has accorded limited protection to foreign direct investors. In responding to this critique, it emphasizes China’s history as a developing state with a struggling economy, its past dependence on Western colonial powers and its limited economic capacity, and its recent meteoric rise to being the largest inbound investor destination and the fifth largest outbound investor state. Sixth, the article critiques the assertion that China ought to liberalize its investment law and practice in the tradition of the West. In exploring this issue, it notes that the self-same Western liberal powers that promoted investment liberalization in past decades have increasingly limited such liberalization to protect their vulnerable economics from foreign investment. The article also questions whether China ought to be bound by free market norms that suited the West in the past century but may not suit China in the twenty-first century.