China FDI Booms but Problems Persist for FIEs
M. Foster, Choo Shin Tseng
China has become one of the major recipients of foreign direct investment since Chairman Deng determined in 1978 that China’s economic door should be opened, for both trade and investment. Despite the fact that there is now over thirty years of accumulated knowledge and experience of this new, open China market on which to draw, there are cases where it has proved difficult to deal with China as partners due to legal and regulatory frameworks operating in China. This is true not only for western-based, non-Chinese firms but also for firms from the Chinese diaspora. We examine a number of such problematic cases, seeking to understand the roots of the problems experienced by the foreign entities and what may be the solutions. All of the case firms experienced difficulties to some degree with the Chinese legal system, the regulatory system, or what might be called tacit regulation, where investing firms have difficulty with other firms such as suppliers who are not part of the legal, or quasi legal system, but have effects on the investors which seem to have the tacit support or approval of government. The experience of these case firms confirms the picture that it is hard for foreign directed entities to win legal or regulatory battles in China.