Leading towards China’s development goals: Can China’s domestic law governing outward direct investments fulfil the role?
Yawen Zheng
School of Law - College of Humanities, Arts, and Social Sciences - University of Edinburgh
Abstract
The implementation of the “going-out” strategy since 2000 has successfully promoted a large number of China’s investments abroad, which have triggered economic growth and social development over the past decades, by absorbing advanced technology, obtaining needed resources or raw materials, and promoting exportation of products, labour and equipment. In order to continue the growth of outward investment flows while improving the quality of their development, China has set various development goals closely related to their proper utilization. These goals are A) building technological capacity, B) deepening integration into the global economy, C) promoting green development, D) protecting public security, and E) participating in global economic governance and rule-making. To achieve the development goals, China needs to ease its administrative control over outward investments, encourage more desirable flows and effectively regulate and supervise them. Accordingly, China’s domestic legal regime governing these investments can be divided into three main constituents: supervision, promotion and protection. These paper finds that all the constituents have problems that can affect their ability to lead the investments towards the goals, and thus further improvements are necessary. There are two main regimes governing China’s outward investments. One is led by the National Development and Reform Commission, which mainly supervises investment projects. The other is led by the Ministry of Commerce, which mainly manages establishing or participating in overseas enterprises. Both regimes cover the pre- and post- establishment phrase. Although their supervision can somewhat lead China’s outward investments towards the development goals, to have two independent regimes creates extra investment costs and is too cumbersome to encourage investment flows. Moreover, some elements in the regimes are overlapped or conflict with each other, while others are either overly detailed or opaque, and thus the effectiveness of the supervision can be affected. The promotion mechanism of outward investments consists of various elements from regulatory and policy documents like the guideline catalogue of overseas investment sectors to investment promotion activities organized by the government. The mechanism aims at serving the following purposes: information provision, guidance, assistance and support, which together have successfully guided China’s outward investment flows into desirable countries and sectors, and thus contribute to the development goals. However, the mechanism fails to both support private firms going global and help enterprises find a competitive foothold in global value chains and overseas markets. Therefore, further improvement of the mechanism is necessary for the goals. The protection of outward investments is developing recently, with the establishment of a service centre to handle Chinese enterprises’ overseas business complains, and the mechanism of overseas investment insurance. However, the protection regime suffers from various problems, like insufficient coverage of overseas investments, lack of pertinent laws, and weak and problematic insurance system. Accordingly, further improvement is needed so as to ensure that the protection regime can fulfil the need of outward investments and encourage their development, and thus contribute to the goals.
Keywords
China’s domestic law, outward investments, development goals
