By Paul Edelberg

On January 17, 2017, the State Council issued a circular on a new foreign direct investment policy to open up China’s economic system. At first glance, it would appear that this policy is a reaction to the slowdown in China’s economy. However, in actuality, this recent initiative is connected to a longer-term effort, formulated in 2012, which aims to gradually open up Chinese markets to foreign direct investment (FDI) and to more closely conform with international standards. Understanding the historical background of this policy is important, as it can shed light on the Chinese Government’s long-term objectives and the potential ramifications of the recent legislation.

This article will discuss the evolution of China’s opening-up policies, paying close attention to regulations regarding partial or full foreign ownership of Chinese enterprises. The issue is topical, as China has recently been involved with intense negotiations between both the U.S. and the European Union (EU). On the one hand, the U.S. and the EU have pushed for increased access to China’s markets, which would simultaneously increase investment opportunities for the involved parties. Conversely, China has attempted to minimize foreign presence within key industry sectors, until it is deemed that its domestic companies have become efficient enough to compete with outside forces. Although the World Trade Organization requires China to allow foreigners some access to its markets, this opening has been at a pace too gradual to satisfy the U.S. and EU. Importantly, the country has strictly regulated foreign investment, permitting only some FDI through Chinese entities with partial or full foreign ownership, commonly known as foreign-invested enterprises (“FIEs”).This article will review the historical regulation of FIEs and the recent dramatic changes in this regulatory scheme.

A. Background 

At the core of the Central Government’s regulation of foreign ownership of Chinese entities, otherwise known as foreign direct investment (“FDI”), is the Foreign Investment Industries Guidance Catalogue (The “FDI Catalogue”) promulgated by the National Development and Reform Commission (“NDRC”) and The Ministry of Commerce (“MOC”). The FDI Catalogue sets forth three explicit categories; encouraged industries, restricted industries and prohibited industries to foreign investment.

Those industries that are encouraged are accompanied by special incentives for foreign investment. Often, these industries receive preferential treatment or economic benefits. Some have restrictions on the percentage of foreign ownership or other qualifications. Those industries that are restricted have limitations such as percentage ownership, qualifications of the foreign investor, majority Chinese ownership, etc. Restricted industries typically require special approval from MOC upon demonstration that the restrictive conditions have been satisfied.  Approval for FDI in a restricted industry has taken much longer than the six-month time period for permitted industry investments.  Those industries that are prohibited do not permit any foreign investment. These industries are considered to be deeply linked to China’s national security, infrastructure, or economic well-being.

A fourth unmentioned category is permitted foreign investments. Industries that fall under this category historically have required MOC approval, although the process is more perfunctory and less substantive. Generally, the approval process for FDI within the permitted category takes approximately three to six months, and it involves not only applications to MOC, but also to a myriad of other governmental agencies, including the State Administration of Industry and Commerce (“SAIC”).

Industries in the permitted category

Inbound FDI into China must also abide by the “Three Basic Laws”, or the three regulations that govern foreign ownership entry into China: the Law on Wholly Foreign-Owned Enterprises (The “WFOE Law”), the Law on Sino-Foreign Equity Joint Ventures (the “EJV Law”), and the Law on Sino-Foreign Cooperative Joint Ventures (the “CJV Law”). The WFOE Law has governed the formation of wholly foreign-owned enterprises (“WFOEs”), which are entities that are 100% foreign-owned. The EJV Law governs the formation and structure of equity joint ventures (“EJVs”), which are legal entities that have partial foreign ownership and partial Chinese ownership.The CJV Law governs the structure of a contractual joint venture, while is a more contractual relationship, akin to contractual joint ventures in the West. Under the “Three Basic Laws” there were minimum requirements on capital, the timing of capital contributions, cash contributions for foreign contributions, capital contribution verification reporting requirements and restrictions on the repatriation of capital. Combined, these factors meant that forming an entity under the Three Basic Laws was both cumbersome and time consuming.This article will later discuss how the recent State Council legislation has transformed this process.

Other formation requirements included name approval, business license approval with the SAIC, organization codes certification, registrations with provincial and local tax bureaus, bank registration, social welfare bureau registration and other registration filing requirements with various governmental agencies. In addition, FIEs have had to comply with additional provincial and local FDI policies.

This cumbersome process is in contradiction to the ease of entity formation in may Western countries. It has served as a market entry barrier to foreign investment in China and has created disadvantages for FIEs in China that compete with domestic Chinese entities.

B. The Twelfth Five Year Plan

The Chinese Government has a long-term economic planning process, which includes outlining five-year plans adopted by the National People’s Congress. In furtherance of the Twelfth Five Year Plan (2011), the NDRC thereafter adopted the Twelfth Five Year Plan on Foreign Capital Utilization (the “12th Foreign Capital Five Year Plan”) in 2012, which revolved around modernizing China’s market economic system.  Its stated goals were to make the markets fair, open, and transparent, to implement a unified market entry system, to provide national treatment for both foreign and domestic companies, to create a Negative List concept (discussed below), to create special economic free trade zones and to eliminate protectionism and favoritism for domestic companies. The 12th Foreign Capital Five Year Plan also emphasized a focus on emerging industries, such as energy, environmental, information technology, biotech, advanced equipment manufacturing new materials, new energy vehicles, healthcare and service sector industries. Resource-intensive and environmentally damaging industries were deemphasized and financial reform and opening up to foreign investment were promoted under this plan.

This blueprint was the foundation for many of the market entry reforms that were to occur over the next several years.

C. Free Trade Zones  

China (Shanghai) Free Trade Pilot Zone

In October of 2013, the Central Government introduced the China (Shanghai) Free Trade Pilot Zone, commonly known as the Shanghai Free Trade Zone (“SFTZ”).  The SFTZ is a designated area within Shanghai located near logistic sites. For businesses formed within the SFTZ, certain restrictions and prohibitions under the FDI Catalogue are lifted or eased, and market access is more readily made available. Therefore, companies that form in the SFTZ can conduct business within the SFTZ, or in some cases within all of Shanghai, that they would otherwise not be able to conduct on a national basis. The SFTZ also created the concept of a “Negative List,” which is a list of industries that are exempted from the market entry easing of the SFTZ. For those items on the Negative List, the old process of approval is still in place.

The SFTZ was designed as a pilot project and a model for future free trade zones in other parts of the country and for eventual national implementation. As discussed later, other similarly modeled free trade zones have been created. The discussion on the SFTZ that follows applies in substantial part to the other free trade zones as well.

The components of the SFTZ include (i) a lifting or lessening of market entry restrictions and prohibitions by industry sector, (2) the streamlining of procedures for forming FIEs, (3) financial reform, and (4) special customs procedures to ease the movement of goods to and from the Zone. The financial reforms are some of the most innovative and ambitious under the SFTZ, and include the following:

  • Capital convertibility, in which capital accounts are freely convertible and in which the conversion of capital to foreign currencies will not be subject to foreign exchange controls;
  • Cross border settlements in RMB, allowing some level of settlement within certain cross-border trades to be made in RMB; and
  • Interest rate liberalization, in which both loan rates and deposit rates are permitted to be determined by market conditions.

The SFTZ Negative List lifts or eases a number of restrictions and prohibitions applicable to FIEs on a national basis. For example, the SFTZ permits wholly foreign-owned enterprises (WFOEs) for ship management companies, luxury cruise vessel manufacturing, aircraft and aeronautics equipment design and manufacturing, auto electronics manufacturing, value-added telecommunications services, foreign-owned entertainment facilities, medical institutions, and paper manufacturing.These are departures from the FDI Catalogue.  The SFTZ also permits majority JV ownership for human resource agencies, construction companies, entertainment artist industries and non-Chinese maritime transport companies. In some of these instances, the easing or lifting was accompanied by certain qualification requirements or minimum capital requirements. Foreign law firms are allowed to form contractual joint ventures with Chinese law firms within the SFTZ. Minority ownership is allowed in certain direct selling businesses and basic telecommunication businesses if specified qualifications are met. Therefore, a foreign company wanting to engage in one of these businesses in China could do so under the SFTZ rules in Shanghai, although not permissible outside of the Zone.

The SFTZ provides for an expedited formation process for FIEs in those industries that are not encompassed within the Negative List. For non-Negative List FIEs, a streamlined application process was established providing for one-stop shopping to the Shanghai Administrative Committee formed within the SFTZ (the “Administrative Committee”), which Administrative Committee will then coordinate with the various agencies typically involved in the approval process. Shareholders in a SFTZ FIE can agree on their respective capital contributions and the mode and time limit of payment and these shareholders have responsibility only for their pledged capital contributions and not for their JV partners’ contributions. Most importantly, the approval process is replaced with a filing registration process, which is the same for both domestic and foreign investors. Only basic information is required. This is a major deviation from the approval requirements applicable nationally. The annual inspection requirement is replaced by an annual reporting requirement, which is subject to public inspection. Under the SFTZ policies, enforcement actions against an FIE will be published on an integrity, or credit information, system.

With companies on the Negative List, the old approval processes still apply. It should be noted that foreign-invested mergers and acquisitions are outside the scope of the Negative List approach and are subject to the standard lengthy MOC approval process.

The Shanghai Free Trade Zone also offers expedited customs procedures. Finally, the SFTZ introduces the concept of national security review as a much larger component of the formation process for foreign invested entities.

As a mechanism for attracting foreign investment, the SFTZ reportedly has had limited success. While the vast majority of enterprises formed in the SFTZ are domestic enterprises taking advantage of certain aspects of the Zone, there have also been notable foreign entries such as Apple’s Apply Pay mobile payment service and’s e-commerce operating center to sell imported products into Shanghai. Financial leasing companies such as Volvo Financial Leasing have also set up operations in the SFTZ. The favorable customs procedures have been implemented. But many of the financial reforms have either been slow in implementation or not effective, impeding the financial funds management of FIEs in the SFTZ.

Tianjin, Fuzhou and Guangzhou Free Trade Zones

In 2015 the Central Government introduced three new free trade zones in Tianjin, Fuzhou and Guangzhou. These free trade zones are structurally similar to SFTZ, and they emphasize industries that the Government wants to promote in those particular regions. The announcement of these free trade zones was coupled with a reduction in the Negative List to eighty-five restricted industries and thirty-seven prohibited industries, changes that also applied to the SFTZ.  Despite this reduction, there was no significant opening of industries.

Other Free Trade Zones 

Also in 2015, the government announced the Beijing Pilot Program, which was designed to open access to the science and technology, internet information, culture and education, financial services, commerce and tourism, and healthcare industries. However, no regulations have been issued as of yet. The government also announced plans to organize seven new free trade zones, although there has similarly been no progress made on this initiative as of now.

National Security Review Within the Free Trade Zones

On April 8, 2015 the General Office of the State Council released the Measures for the National Security Review of Foreign Investment in Pilot Free Trade Zones. These Measures outline the national security review process for foreign investment within established free trade zones. The procedures are integrated with the process for national security review established in 2011 for transactions resulting in foreign controlling interests (the “National Security Review Rules”). The Measures cover transactions that affect or might affect national security or national security capabilities or that involve sensitive investment subjects, sensitive targets of acquisition, sensitive industries, sensitive technologies, and sensitive regions. This broad scope extends beyond traditional national security industries and includes transactions involving important agricultural products, energy sources and resources, basic facilities, transport services, culture, information technology products and service, key technologies, and major equipment manufacturing.

Modeled after the U.S.’s CFIUS structure., the National Security Review Rules established a Joint Conference headed by NDRC and MOC. If the Administrative Committee in a free trade zone determines that a transaction or investment submitted for approval in the free trade zone might be subject to national security review, or if the foreign investors have submitted the transaction or investment for national security review, then the Administrative Committee will suspend the free trade zone application process until the national security review is completed.

The Measures encompass investments in new enterprises or projects, foreign mergers and acquisitions and contractual and other indirect transactions resulting in foreign controlling interests.

D. Company Law and Registration Amendments

While the free trade zones provide for market access on a localized level, the Chinese Government has also addressed market access easing on a national level. Specifically, the Company Law Amendments (2013)promoted the government’s “lenient entry, strict supervision” policy, as it was known, and consisted of several major changes.

The first major change was the elimination of minimum capital requirements. Previously, the law required statutory minimum amounts of registered capital and a 20% minimum capital contribution for each investor, as well as a requirement that at least 30% of registered capital be in the form of cash.

A second change was the elimination of deadlines for capital contributions. Prior to this measure, initial capital contribution requirements outlined that payments had to be made within thirty days and total contributions had to be collected within two years. Now, rather than Government enforcement of this requirement, the various investors of the FIE became empowered to enforce their own subscription requirements in accordance with their governing documents.

Capital registration procedures were also simplified. The Amendments eliminated the capital verification report that verified to the Government when capital is contributed, among other things.

E. FDI Catalogue

The Negative List concept that was introduced into the Free Trade Zones was effectively a replication of the FDI Catalogue but with revisions lessening or lifting certain restrictions. For FIEs that were outside of the Free Trade Zones, the FDI Catalogue continued to govern. In 2015, NDRC and MOC released a revised version of the FDI Catalogue, cutting the number of restricted industry sectors in half from the 2011 version of the FDI Catalogue, from 79 to 38. The 2015 revision further expands the list of industries in which WFOEs are now permitted or in which Chinese majority ownership is required. Some of these changes were based on the Government’s experience with the Negative List within the free trade zones.

On the one hand, the FDI Catalogue has been used to encourage foreign investment in growth industries within China or in industries where foreign expertise is sought. However, the Catalogue also outlines a number of restrictions and prohibitions which limit foreign investment in areas with gross overcapacity or environmental concerns or in industries that are tied to national security or national infrastructure considerations. Thus, the FDI Catalogue is a primary instrument that the Chinese government uses to direct industrial expansion and to shape economic growth.

The 2015 FDI Catalogue eliminated the restrictions on the following industries, thereby permitting FIE investment:

  • Non-value-added E-commerce for technology, media and telecommunications;
  • Certain types of chemical manufacturing;
  • Pharmaceutical manufacturing;
  • Certain types of transportation equipment manufacturing;
  • Railway freight transportation companies;
  • Direct, mail order and online selling companies; and
  • Distributing and selling of audiovisual products.

It also loosened or eliminated the requirement for joint ventures for certain e-commerce platforms, for the construction and operation of branch and intercity railway lines and related infrastructure projects, and for the operation of entertainment performance sites. Service sector restrictions were similarly reduced. For example, WFOE ownership of e-commerce platforms is now allowed, in keeping with the allowance of e-commerce platforms in the SFTZ. Finally, the restrictions were removed on the manufacturing of certain medical and pharmaceutical products.

On the other hand, the 2015 FDI Catalogue re-imposed restrictions on FIE ownership of medical institutions, which can no longer be wholly owned and must be owned as equity joint ventures or contractual joint ventures. WFOE ownership of medical institutions is still permitted in the free trade zones, however. In addition, secondary educational institutions must be owned by EJVs or CJVs in which the Chinese investors own at least 50% of the equity.

In December of 2016, NDRC and MOC published for comment a revised draft of the FDI Catalogue, probably in anticipation of finalizing the pending negotiations on the U.S.-China Bilateral Investment Treaty with the Obama Administration. This draft reduced the number of prohibited and restricted categories from 93 to 62, and it relaxed and in some cases lifted restrictions on foreign investment in the service, manufacturing and mining industries, including:

  • railway transportation equipment manufacturing;
  • new energy vehicle equipment manufacturing;
  • motorcycle manufacturing;
  • precious metal mining and exploration;
  • lithium exploration;
  • exploration of oil sands, oil shale and shale gas;
  • edible oil processing;
  • credit investigation and rating services.

This draft is still pending.

F. Foreign Investment Law

On January 19, 2015, MOC released The Draft Foreign Investment Law (the “Draft Law”), which aimed to overhaul the existing FIE investment structure and incorporates many of the innovations implemented in the Free Trade Zones. Specifically, the Draft Law included the following features:

  • “National treatment” for most FIEs, providing for the same registration process as for domestic enterprises. Most FIEs no longer need to register with MOC, and just need to register with SAIC;
  • The repeal of the Three Basic Laws;
  • The law would encompass most foreign interests, including domestic enterprises controlled by foreign interests and greenfield investments.

The Draft Law also incorporates the Negative List concept. Companies wishing to invest in industries on the Negative List would still be required to apply through MOC under the existing procedures and would not be granted national treatment. FIEs within the scope of the Negative List would be required to obtain an entry permit for restricted investments through a newly established MOC process. However, the entry permit process would incorporate certain innovations applicable to non-Negative List FIEs. Once a proposed FIE established compliance with restrictions for that particular industry, MOC would no longer approve the formation documents, but would simply record the registration, consistent with the Company Law Amendments.

The Draft Law incorporates existing merger and acquisition and antitrust and national security review processes. The national security review process, which would gain increased attention, has many of the same features as the CFIUS process in the U.S.

The Draft Law introduces a substantial reporting and inspection process, with requirements for reporting within thirty days after the foreign investment is made, annually and at the time of any change in application terms. The reports would require extensive disclosure of the business operations and finances, although proprietary information would not be disclosed. These reports would be open for public inspection.

The Draft Law also heightens the supervisory role of the applicable government authorities, including mechanisms for lodging complaints, resolutions and disputes, whistleblower features, “integrity” and wrongdoing public listings and penalties for violations and improper behavior.

It was anticipated that the Draft Law would be acted upon fairly soon after its January 2015 announcement. However, with the lapse in time and some of the other innovations discussed below since the announcement of the Draft Law, it is not clear what the current status of the Draft Law is or whether any eventual new foreign investment law will retain all of the features of this Draft Law.

G. Recent Developments 

On October 8, 2016, the NDRC and MOC jointly issued Circular No. 22, which states that the national Negative List shall be determined by reference to the FDI Catalogue. In other words, no new pronouncement in the form of a Negative List would be published, but rather the FDI Catalogue and the Negative List would be synonymous. Circular No. 22 further stated that FIEs that are in the encouraged list and are not subject to shareholder or management requirements, and FIEs within the permitted scope no longer need to file for approval, consistent with the Company Amendments. The examination and approval procedures will be replaced by a recordal system, whereby a mere filing with MOC would be required. This process would also apply to corporate changes, such as capital increases, change in business scope, share transfers, and change of legal address. These changes were also reflected in MOC’s pronouncement on October 8, 2016 of the Provisional Measures on Management of the Establishment and Changes of Foreign Invested Enterprises. Furthermore, the Three Basic Laws were amended to incorporate the recordal process, rather than the approval process. (Note that the Draft Foreign Investment Law called for the repeal of the Three Basic Laws.)

Under the recordal process, the registration with MOC can occur online. Within three days after recording, MOC will issue a recordal certificate. That certificate is not required for obtaining the business license with SAIC and can be recorded within 30 days after registration.

In December of 2016 the Chinese Government announced revisions to the FDI Catalogue that would further encourage FDI, as discussed above. In conjunction with that pronouncement, on January 17, 2017 the State Council issued a circular for a “new open economic system.” The new State Council measures will lower restrictions on foreign investment in banking, securities, investment management, insurance and accounting sectors. While implementation of the State Council circular has yet to be finalized, these measures are aimed to send a message to the rest of the world that China seeks to take the lead in fighting protectionism and in promoting globalization. It is instructive to note that the State Council announcement preceded  the inauguration of the Trump Administration by a few days.

The new measures to the FDI Catalogue and the State Council circular, when taken together, relax the restrictions on foreign access to bank financial institutions, securities companies, fund management companies and insurance institutions. Rules regarding access to oil shale production, oil sands production, and shale gas production were similarly lessened. The measures also remove access restrictions for equipment manufacturing, rail transportation, motorcycle manufacturing, and fuel ethanol production and oil production. Finally, it liberalizes the restrictions on foreign access to the accounting and auditing service sector, the building design service sector and the rating agency service sector were liberalized under these new measures. The new policy additionally:

  • allows FIEs to list on the Shanghai and Shenzhen Stock Exchanges as well as a new Third Board, which would be the country’s biggest over-the-counter exchange;
  • encourages cooperation between domestic manufacturers and manufacturing FIEs to conduct research and development and eases resident and business policies for high-level talent;
  • permits the subsidization of industrial land for as low as 70% of national standard leasing costs;
  • reaffirms the recordal system;
  • eliminates the requirement on registered capital for FIEs and reaffirms national treatment.

It purports to provide the same access for FIEs for government procurement opportunities as now exist for domestic companies.

Finally, it authorizes local governments to introduce policies favorable to FIEs, including tax policies, and to encourage employment, economic development and technology innovation. These local government efforts are particularly encouraged in the central, western and northern regions of China, where economic development is needed.

These measures effectively implement on a national basis many of the innovations in the free trade zones. They aim to spur FDI at a time when China is experiencing a drop in foreign investment and a slowdown of its economy. They also appear to be timed as a counterweight to the new anti-globalization policies of the Trump Administration, as China seeks to fill a perceived void that may be created by a less global U.S. and to benefit from this void.

H. U.S.-China Bilateral Investment Treaty

The U.S. and China have been engaged in negotiations on a bilateral investment treaty since 2008. Significant progress has been made, and in April of 2016 the terms of a potential treaty were nearly complete. While the substance of these negotiations is not within the public domain, it was reported that the final obstacle was the production by the Chinese Government of a Negative List that was acceptable to the U.S. Government. That list had not been forthcoming, although the December 2016 proposed Negative List may well have fulfilled that requirement.

In part based upon the market entry reforms discussed in this article, one can speculate that the U.S. has been seeking a more expedited entry process, with some level of national treatment for U.S. companies doing business in China as well as a more limited Negative List. A treaty most likely would require some level of reciprocity in treatment.

The U.S.-China negotiations parallel negotiations between the European Union and China for their own bilateral investment treaty. It is assumed that the two treaties would be similar if adopted.

Under the Obama Administration, it was anticipated that the treaty would be presented to Congress in 2017. It is less clear whether the Trump Administration will continue the negotiations or whether it will abandon the bilateral investment treaty.

I. Limitations on Foreign Access

In contradistinction to the efforts made by the Chinese Government to enact laws and announce measures to make foreign market entry into China by foreigners more accessible and less cumbersome, the Chinese Government has made foreign entry into certain realms more difficult.

China’s Ministry of Industry and Information Technology, in conjunction with the State Administration of Press, Publication, Radio, Film and Television (“SARFT”), issued new rules effective March 10, 2016 setting stiff rules limiting, and to a certain extent prohibiting, online publications by foreign entities. The restrictions cover not only traditional news media, but also texts, pictures, maps, games, animations, audios, and videos. Technical equipment, related servers and storage devices must be housed in China. Content is controlled and subject to Government supervision. Cooperating domestic enterprises must obtain SARFT approval.

The Chinese Government has also shown increased resistance to non-governmental agencies (“NGOs”) establishing offices in China. China adopted a law effective January 1, 2017 whereby NGOs must register with the designated governmental authority for its area of interest and with the Ministry of Public Security.  Some of the requirements include the following:

  • The NGO must have operated substantively for a two-year period;
  • The NGO must be subject to civil liability and have sufficient resources to pay for damages;
  • The NGO must have a clear mission; and
  • The NGO must demonstrate how it benefits Chinese society.

It encourages NGOs in the areas of culture, health, technology, sports, environmental, education and areas of economic benefits to China. A number of NGOs that were already in China were required to relocate outside of China upon enactment of the new law until such time as their NGO registrations are accepted. There are concerns this new law will be used to limit the admittance of legitimate foreign NGOs and to monitor their activities. Clearly the Chinese government has drawn a distinction between opening up its markets for economic growth and allowing nonprofit organizations from impacting policy.

These two examples of tightening Chinese controls on foreign access highlight the Central Government’s reluctance to loosen its control over the dissemination of information within China and the influence of foreign nonprofit organizations over Chinese social policies.

J. Conclusion 

China’s free trade zones, and in particular the SFTZ, have had some success in opening markets to foreign investment on a local level. While foreign companies wish for a less restrictive Negative List in the free trade zones, some have been able to take advantage of these pilot free trade zones. The Chinese Government’s introduction of the Company Amendments, of national treatment for FIEs and of the recordal system are clearly improvements and eliminates procedural obstacles to market entry. The Draft Foreign Investment Law is also evidence of the Government’s positive direction towards loosening market access restrictions. The sticking point is the Negative List, which from a foreign perspective is overly broad and restrictive. This is the substantive block to truly open market access by foreign companies on a national basis.

China’s market entry reforms have not been ad hoc, but rather a thoughtful process of experimentation and gradual adjustment, thereby promoting stability and the growth of its domestic industries. While the Chinese Government will time the introduction of reforms to promote its economic or political agenda, it has clearly signaled that it is willing to open its doors to foreign entry and to achieve some level of reciprocity.

With a long history of foreign domination, China fears foreign economic control. The Government wants to restore China to the global greatness it once possessed and to become a global player and leader.  An orderly and negotiated opening to foreign economic interests is in China’s interest.

On the other hand, as a WTO member China can be criticized for slowly opening its markets and for protecting its domestic enterprises. Chinese companies have been free to expand globally on a one-way street. The Western countries allow Chinese companies fairly open access to their markets and are simply asking for an even playing field.

Provided China continues its efforts to open up and carries through on the implementation of its new reforms, there is hope for a favorable resolution of this debate. A well-negotiated U.S.-China Bilateral Investment Treaty would go a long way to finding an appropriate balance to these two conflicting perspectives.


Paul Edelberg is a partner at Fox Rothschild LLP and can be reached at [email protected] or 203-425-1521.  For more than three decades, Paul’s practice has focused on corporate and commercial law for privately owned businesses, with an emphasis on general business counseling, commercial finance, mergers and acquisitions, private equity and venture capital and international trade and cross-border transactions. His multifaceted practice enables him to serve the domestic and international needs of a wide range of clients, particularly those with interests in China.

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