Originally from Business Disputes In China - 3rd Edition

Foreign Investment in China and Chinese Foreign Investments Since the beginning of the 1980:s, when China concluded its first bilateral investment treaty (“BIT”), China has demonstrated a significant shift from a rather protectionist policy on foreign investment to a gradually more liberal view. Such development is reflected, inter alia, in the great number of investment treaties concluded by China in recent years. By June 2008, China had concluded 123 BITs (the second highest number of BITs in the world).1 China has also modernized many of its existing BITs. This development of the Chinese policy on investment protection is frequently described as the shift from the first to the second generation of Chinese BITs.

Discussions regarding China BITs have almost always had the perspective of foreign investments in China, with the focus on the inadequate protection offered by the first generation of Chinese BITs. This is understandable. Looking at the statistics, during the past decades, foreign investment in China has by far exceeded Chinese foreign investment.2 Moreover, the main rationale for China’s development of a more liberal view on foreign investments, and enhanced investment protection, has been to attract more foreign investors rather than to pave the way for Chinese investment overseas.

Due to the rapid economic growth in China during recent years, however, China has also become an increasingly important source of outbound foreign investment. The Chinese government has taken important steps to encourage outbound investment. A recent study of China's approach to such investment found that the Chinese government's approval process for outbound foreign investments has been streamlined and decentralized in order to promote foreign investments by Chinese enterprises.3 In 2007, China's outbound investment totalled over US$ 26 billion, with South American and Asian countries being the main target of these investments. Considering this deelopment, and in particular the significant amount of investments made by Chinese companies in Africa and South America,4 Chinese companies investing overseas have as much to gain from the progressive development of Chinese investment treaties as companies investing in China.