Foreign investors have much to navigate in a volatile environment where the rule of law is subordinate to the interests of the ruling party.

By Chen Guangcheng | Published by Newsweek

Summary

For foreign companies and corporations used to the protective umbrella of a commonly understood legal playbook, investing in China poses a significant risk, writes Chen Guangcheng.

Since China’s entry into the World Trade Organization (WTO) in 2001, the Chinese Communist Party (CCP) has engaged in a delicate balancing act. On one hand, it has sought to attract foreign investment by appearing to enact reforms that align with Western expectations, such as written laws, elections, and anti-corruption campaigns. On the other hand, these measures are often criticized as superficial or serving the CCP’s interests, rather than reflecting genuine changes towards a more open and rule-based system.

The CCP’s ability to arbitrarily prioritize policy over law or vice versa, depending on its needs, creates a volatile environment for foreign investors. When there is no consistent or fairly applied rule of law, an unpredictable investment landscape leaves foreign investors vulnerable to unforeseen challenges and losses, even punishment under the guise of legality.

Read the full analysis at the publisher’s website here

Chen Guangcheng is a distinguished fellow at the Catholic University of America’s Center for Human Rights.