MJIEL Vol 2 Issue 3 2005 - A2


Whilst China's success in attracting foreign direct investment (FDI) has been undisputed and unprecedented, it is unclear whether and to what extent law has played a role in such a success and how foreign investors view the legal environment of investing in China. This paper attempts to address the two questions by referring to first hand empirical evidence through a questionnaire survey and interviews among EU investors, governmental officials and chamber of commerce officers.

The empirical evidence shows that law had played a very important role in investor's decision-making process. Most investors had conducted an in-depth research on the legal environment before they invested, including not only the written law but law in action; not only Chinese laws and regulations but also applicable international agreements. Contrary to what is commonly believed, an overwhelming majority of foreign investors considered incentives a very important factor when they decided to invest in China. The survey also confirms the positive impact of China's accession to the WTO and a potential new investment treaty in improving the investment conditions.

The study also demonstrates that foreign investors considered China as a safe place to invest. They appreciated the great efforts the Chinese government had made to attract FDI, particularly the implementation of national treatment, the elimination of certain performance requirements, the relaxation of foreign exchange regime, and the strengthening of IPR law and enforcement. However, they also thought that a better investment could be achieved by, in particular, strictly enforcing IPR laws.

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