Chinas Practice in International Investment Law

The first draft of this paper was presented at the Conference on The Future of Investment Treaty Arbitration: Challenges and Response held at the SNU on May 12, 2012.China is now the largest recipient of foreign direct investment among emerging markets and a major home country for FDIs. In less than 40 years since it began its modernization process in the late 1970s, the country has entered into more than 120 bilateral investment treaties (BIT) and free trade agreements (FTA). With the status change from a pure capital importing country to a country of both importing and exporting capital, Chinas policy toward foreign investment has evolved from emphasizing the rights of home States to focusing on protection of investors and investments. An example in this regard is investor-state arbitration which was strongly resisted by China but now a common feature in all BITs and FTAs to which China is a party. This article first examines Chinas practice toward foreign investment over the last three decades and more, analyzing Chinas policy reflection on treaties and laws. The mechanisms that China has established in respect of foreign investment are discussed. Thereafter, detailed comparison and discussions are made between Chinas treaty practice and international investment arbitration to illustrate in what way and to what extent Chinas practice is in compliance with contemporary investment arbitration practice. Issues analyzed include, qualified investors and investments, fair and equitable treatment, minimum standard of treatment, full protection and security, most-favoured-nation treatment, national treatment, expropriation and compensation, and mechanisms relating to dispute resolution