By Michael Eylerts

In the early 1990s, foreign investment in China increased dramatically and played a major role in the nation’s economic rise throughout the 90s and the early 2000s[1].  In 2004, China’s GDP was estimated around $1,649.3 billion and was ranked number 7 internationally[2].  However, by 2014, China was ranked second, with an estimated GDP of $10354.8 billion[3].  Along with its sizeable growth, the creation of the Asian Infrastructure Investment Bank, led mostly by China, represents a shift to the east regarding investment influence, with China surpassing almost every Western power in terms of foreign direct investment throughout Western Asia and Sub-Saharan Africa[4].  Unsurprisingly, many estimates reflected a trend that would inevitably result in China being the largest economy in the world within the first few decades of the millennium[5].  Nevertheless, the quick rise of China’s economy has come to a slow end, with China’s stocks plummeting systematically over the past few years in response to bad loans by Banks and repeated property speculation.  The question posed now is whether China will react with further governmental regulation or liberalize its market and offer the level of consistent rule of law protections that the West has sought for years.

With “approximately 200 multinational enterprises with foreign investments in China, including 17 of Japan’s largest companies and 9 out of 10 of Germany’s largest companies”, China’s economic rise is due in sizeable part to these foreign companies[6]. During the talks at the EU-China Business and Urbanization Summit, “China expressed interest in the EU’s 315 billion Euro Investment Plan”, hoping to build further cooperation with regards to access to new technologies[7].  Bilateral trade between the supranational free market entity and China reached over 467 billion Euros in 2014 and illustrates the level of interconnectedness to which the Chinese economy is accountable to[8].  Letters from both the EU Delegation to China, Hans Dietmar Schweisgut, and ambassadors from the U.S., Germany, Japan and Canada, on China’s new draft legislation concerning governmental oversight, represent joint communications from the largest sources of investment within China[9]. These letters address unease towards heightened governmental supervisory powers over certain technologies and company data, as well as sweeping government censorship powers regarding foreign non-governmental organizations[10].  China’s stance as a transition economy and mixed market already bears with it a taboo concerning regulatory uncertainty with regards to FDI, underscoring the importance of China’s ability to present to investors a stable and profitable market.

The importance of investor’s confidence is insurmountable in the globalized economy and suggests that China must move towards affording greater protection towards foreign-owned assets.  One of the provisions being challenged by the Western delegation is a cyber-security law requiring local data storage by companies in China[11].  Needless to say, the concerns emerging are centered around theft of intellectual property rights, a concern that has impugned the reputation of China as a suitable home for foreign-businesses since the dawn of its intellectual property (IP) laws.  In 2013, the bipartisan Commission on the Theft of American Intellectual Property of the U.S. Trade Commission released a report citing China as the world’s largest source for IP-theft[12].  The European Union Chamber in Beijing issued a report in early-June that called for further IP-reform in China, citing to “worryingly high” statistics of European companies viewing IP-protection in China as inadequate[13].  The United States and Germany are two of the largest IP-filing countries, overtaken recently by China, and both of these countries represent two of the largest economies in the western hemisphere and have sizeable investment in China[14].  China’s economic growth and influence was quick to come and, without reform, the decline in new businesses and thus investment in China will persist[15].  With further reform, China’s IP-industry could become an additional drive towards market liberalization, due in part to the nature of the exclusive property rights to be granted to the individual owners and the increasing pressure by multiple leaders of financial powerhouses.


[1] Daniel Chow, Thomas Schoenbaum, International Business Transactions, Wolters Kluwer Law & Business, at 463.

[2] Id. at 462.

[3] World Bank Report 2014: China GDP Ranking, Amnesty International, http://data.worldbank.org/data-catalog/GDP-ranking-table

[4] Financial Times, China’s Outbound Investment set to Eclipse Inbound for First Time, Oct. 22, 2014, http://www.ft.com/intl/cms/s/0/28f6b8d4-59cd-11e4-9787-00144feab7de.html#axzz3QfsPJAxr

[5] Daniel Chow, Thomas Schoenbaum, International Business Transactions, Wolters Kluwer & Business, at 463.

[6] Id.

[7] Press Release, European Commission, EU-China Summit, EC Press Release IP/15/5279 (June 29, 2015).

[8] Id.

[9] Reuters, Major Powers Team up to tell China of Concerns over New Laws, Mar. 1, 2016, http://www.reuters.com/article/us-china-lawmaking-idUSKCN0W225P.

[10] Id.

[11] Id.

[12] IP Commission Report, The Report on the Commission on the Theft of American Intellectual Property, May 2013, http://www.ipcommission.org/report/IP_Commission_Report_052213.pdf

[13] Press Release, European Commission, EU-China Summit, EC Press Release IP/15/5279 (June 29, 2015).

[14] World Intellectual Property Organization, Facts & Figures Publication, at 14. (Feb. 2016)

[15] Business Insider, China’s Economy is still Weak and Unstable, Mar. 3, 2016, http://www.businessinsider.com/chinas-economy-is-still-weak-and-unstable-2016-3.


Edited By: William Eugene Tipton

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