Chinese Legal Reform: The Case of Foreign Investment Law

By Yan Wang | Go to book overview
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The international background to China's foreign investment law

This chapter, after a discussion of the concept of foreign direct investment, will discuss some features of the worldwide development of foreign investment and their impact on the outlook of Chinese leadership to foreign investment. It will then discuss the worldwide liberalization trend of national regulations on foreign investment and its effect on the continuing evolution of China's law and policy on foreign investment.

Foreign direct investment concepts

The legal term investment did not appear, at least in the international context, until after World War II. Even now there is still a lack of uniform definition of foreign investment. 1 General public international law does not provide a legal definition of foreign investment. Various attempts in Western industrialized countries, as well as by international organizations, to create a comprehensive and effective regime for the protection of foreign investment have been unsuccessful. Multilateral international instruments define “foreign investment” in only a few cases involving regional economic integration. 2 Even the relevant multilateral treaties such as the conventions establishing the International Centre for the Settlement of Investment Disputes (ICSID) and the Multilateral Investment Guarantee Agency (MIGA) refrain from including such a definition. It thus falls to the numerous bilateral and regional treaties to adopt their own definitions. Either they provide a broad definition of the kinds of assets to be covered by the treaty or they include a detailed list of the various objects of investment. Sometimes these two approaches are combined in a general definition and an illustrative list of examples.

National law in most developing countries, as well as many industrialized countries, recognizes the notion of “foreign” investment in the context of the regulation of foreign commerce. 3 At this level there is no uniformity either. Most of the relevant provisions appear to cover “direct” private foreign investment.

With the lack of a uniform definition at the level of both international and national laws, different reports and studies have their own definitions. For the purpose of this study, foreign direct investment is defined as follows: foreign direct investment (FDI) is the capital invested in an enterprise or a real asset by a


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