Volume 2, Issue 1, March 2019, Page: 5-15
A Critique of Legal Protection of China’s Outward Direct Investment in ASEAN – Implications of Guangdong Corporations
Jingjia Ke, School of Law, Guangdong University of Finance and Economics, Guangzhou, P.R.China
Received: Jan. 8, 2019;       Accepted: Feb. 22, 2019;       Published: May 23, 2019
DOI: 10.11648/j.ijls.20190201.12      View  112      Downloads  34
Abstract
As a result of the development of the “One Belt One Road” and the strategy of “Going Out” for multinational enterprises, China’s outward direct investments have grown rapidly. During the transformation period from a capital-importing to a capital-exporting country, issues of legal barriers, investment risks and insufficient investment disputes mechanism on China’s outward investment to Association of South East Asian Nations (ASEAN) have surfaced. Although ASEAN countries and China agreed on further liberalization in investment, the effects of investment agreements and Bilateral Investment Treaties on risk prevention and safeguarding investment interests have rarely been discussed and examined via empirical studies. In examine legal barriers, major investment risks, and investment dispute settlement mechanisms of China’s multinational enterprises in ASEAN States, this study selects 30 state-owned enterprises and private companies among 300 Guangdong businesses, which largely invested in ASEAN via data analyses, surveys, and interviews. Nevertheless, the obstacles in investment treatment and high political risks as a result of outward investment in ASEAN suggest that China’s multinational enterprise should start to seek multiple investment insurance either from Sinosure or the international financial institution, or advancing investment treaties and formulating a “Going-in ” strategy. The findings of this research provide a reference to Chinese multinational enterprises for the investment protection and for the launching of investment litigation of these Chinese multinational enterprises whenever it is required.
Keywords
One Belt One Road, ASEAN, China’s Multinational Enterprises, Chinese Outward Investment, Investment Protection
To cite this article
Jingjia Ke, A Critique of Legal Protection of China’s Outward Direct Investment in ASEAN – Implications of Guangdong Corporations, International Journal of Law and Society. Vol. 2, No. 1, 2019, pp. 5-15. doi: 10.11648/j.ijls.20190201.12
Copyright
Copyright © 2019 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Reference
[1]
National Development and Reform Commission, Ministry of Foreign Affairs, and Ministry of Commerce of the People's Republic of China (2015) Vision and Actions on Jointly Building Silk Road Economic Belt and the 21st Century Maritime Silk Road, available at http://en.ndrc.gov.cn/newsrelease/201503/t20150330_669367.html.
[2]
Jiping GUO (2018) “The Belt and the Road is the Great Way in Building the Shared Destiny For Mankind” (Translation added)Renming Daily, 06 October, 2018, http://cpc.people.com.cn/n1/2018/1004/c64094-30325277.html018,, last visited on 14 February 2019.
[3]
China’s outward investment flows in 2017 that downed 19.3% comparing to the figures of 2016, accounts for 11.1% of world outward investment flows. See Ministry of Commerce People’s Republic of China (MOFCOM), 2018 Report on Development of China’s Outward Investment, ( December 2018), available at http://images.mofcom.gov.cn/fec/201901/20190128155348158.pdf, last visited on 14 February 2019.
[4]
Ministry of Commerce of the People’s Republic of China, National Bureau of Statistics, State Administration of Foreign Exchange, 2017 Statistical Bulletin of China’s Outward Foreign Direct Investment, available at http://www.fdi.gov.cn/1800000121_33_11652_0_7.html. last visited on 13 February 2019..In terms of countries destination of investment flows, Singapore ranked first with $6.32 billion, accounting for 44.8% of the total investment flow to ASEAN, mainly to wholesale and retail trade, leasing and business services; Malaysia ranked second with $1.722 billion, accounting for 12.2%, mainly to manufacturing, real estate, and construction; Indonesia ranked third and reached $1.682 billion, accounting for 11.9%, mainly to manufacturing, construction, electricity, heat, gas and water production and supply.
[5]
The manufacturing sector received $3.17 billion, with a year-on-year decrease of 10.4%, accounting for 22.5% and the flows were mainly concentrated in Indonesia, Thailand, Malaysia, Vietnam, etc. And the production and supply of electricity, heat, gas and water sector received $0.63 billion, accounting for 4.5% of the total and the flows were mainly distributed in Indonesia, Myanmar, Laos, etc. ibid.
[6]
See page 139 of Ministry of Commerce People’s Republic of China 2018 Report on Development of China’s Outward Investment.
[7]
Yanhua MAO etal., the Blue Paper on the Guangdong’s Participation in the Belt and Road Initiative (2013-2018) (translation added), Guangzhou: Guangdong People’s Press, 2018, p132.
[8]
Yanhua MAO etal., the Blue Paper on the Guangdong’s Participation in the Belt and Road Initiative (2013-2018) (translation added), Guangzhou: Guangdong People’s Press, 2018, pp 142-143.
[9]
Report on the development and status of “going-out” of Guangdong’s enterprises (translation added), issued by Department of Commerce of Guangdong Province in 2016.
[10]
Page 95 of Ministry of Commerce People’s Republic of China 2018 Report on Development of China’s Outward Investment.
[11]
Karl P. Sauvant and Victor Z. Chen (2013)China’s Regulatory Framework for outward Foreign Direct Investment, China Economy Journal 7, pp141-163, 141.
[12]
Except for China-Brunei BIT that signed on 17 November, 2000., nine BIT remain enforceable, which are China-Singapore BIT (21 Nov. 1985), China-Malaysia (11 Dec. 1988), China-Philippines BIT (20 July 1992), China-Vietnam BITs (2 Dec. 1992), China-Laos BIT (31 Jan. 1993), China-Indonesia BIT (18 Nov. 1994), China-Cambodia BIT (19 July 1996), China-Myanmar BIT (12 Dec. 2001). See available at http://investmentpolicyhub.unctad.org/IIA/CountryBits/42, last visited on 14 February 2019.
[13]
See Key documents guiding the dialogue relations from ASEAN official website, https://asean.org/asean/external-relations/china/#968e439ab92bd0c4a.
[14]
See Agreement on Investment of the Framework Agreement on Comprehensive Economic Cooperation between the PRC and ASEAN, http://fta.miti.gov.my/mitifta/resources/auto%20download%20images/558b8bd29bd01.pdf, last visited on 14 February 2019.
[15]
Jun Xiao, (2011)The ASEAN-China Investment Agreement A regionalization of China’s BITs, 6 Front. Law China 6 pp 241–258, at 254.
[16]
Plan of Action to Implement the Joint Declaration on ASEAN-China Strategic Partnership for Peace and Prosperity, available at http://wtocenter.vn/chuyen-de/13080-china-asean-enter-new-era-of-deeper-strategic-partnership, last visited on 16 February 2019.
[17]
Chapter 3 of Protocol to Amend the Framework Agreement on Comprehensive Economic Co-operation and Certain Agreements thereunder between ASEAN and the People’s Republic of China”, available at https://asean.org/storage/2012/10/Protocol-to-Amend-the-Framework-Agreement-ACFTA-Complete.pdf, last visited on 16 February 2019.
[18]
ASEAN Secretariat Information Paper August 2018, available athttps://asean.org/wp-content/uploads/2012/05/Overview-of-ASEAN-China-Relations-August-2018_For-Website.pdf, last visited on 16 February 2019.
[19]
See WANG Yongzhong and LI Xichen, “Features and Risks of China’s Investment in the OBOR Counties” (translation added) HAN Bin and Wang Yongzhong (eds.), China Outward Investment Report third quarter of 2015, Beijing: China Social Science Press, 2016, pp41-42.
[20]
KE Jingjia (2015) The ASEAN-China Free Trade Area: Neighbors, Relatives or Foes? 1 China and WTO Review 2, pp 191-222,209.
[21]
Karl P.Sauvant and Michael D. Nolan (2015) China’s Outward FDI and International Investment Law, Journal of International Economic Law, 18, Nov.pp893-934.
[22]
Jun Xiao, (2011)The ASEAN-China Investment Agreement A regionalization of China’s BITs, 6 Front. Law China 6 pp 241–258, at 254.
[23]
Yanru Wei (2011) Comparative Studies on International Investment Law unde the ACFTA-on the background of signature and enactment of China-ASEAN Investment Agreement, China-ASEAN Investment Agreement” (translation added), Journal of Guangxi University, 1pp73-77.
[24]
Xuewu Lu (2013)Analyses on Investment Rules under the ACFTA (translation added), Guangxi Social Science, 11, pp37-42.
[25]
Qinlin Zhang, New Development of International Investment Agreements in perspectives of Public Interests, (translation added), Beijing: China Social Science Press, 2014, pp108-110.
[26]
For details, see Article 1 of Agreement on Investment of the Framework Agreement on Comprehensive Economic Cooperation between ASEAN and China, available at http://fta.mofcom.gov.cn/inforimages/200908/20090817113007764.pdf, and Article 1.1 of BITs (P.R.C.-Brunei, Cambodia, Laos, Indonesia, Philippine, Myanmar, Singapore, and Vietnam) and Article 1.3 of China-Thailand BIT. Business concessions include contractual rights such as those under turnkey, construction or management contracts, production or revenue sharing contracts, concessions, or other similar contracts and can include investment funds for projects. See footnote 2 of the ASEAN-China Investment Agreement.
[27]
Article 3(4) of Agreement on Investment and footnote to Article 1.
[28]
2014 Administrative Measures for Overseas Investments, http://www.mofcom.gov.cn/article/b/c/201409/20140900723361.shtml.The proportion of shares in control or management of Chinese MNEs is 10 percent. For detail, see Article 2 of 2006 Statistical System of Foreign Direct Investment,hzs.mofcom.gov.cn/accessory/201102/1297930121981.pdf.
[29]
LI Wenfang (2016) Gcken to list Thai rubber producer, China Daily, 28 November 2016, available at http://www.chinadaily.com.cn/business/2016-11/28/content_27500097.htm. Also see CHEN Min (2013) Seizing opportunity and harvest the overseas investment-status and experiences of Guangken under the “Going Out” policy, (translation added), 29 China Rubber, pp18-20,18.
[30]
For detail please see company’s official website http://www.gdftc.com/en/about/about.asp?t=1 and 2016 short term financing report of Guangdong Guangxin Holding (translation added), available at https://shclearing.com/xxpl/fxpl/scp/201607/t20160728_170897.html.
[31]
Huawei Annual Report 2015, http://www-file.huawei.com/~/media/CORPORATE/PDF/annual-report/AnnualReport2015_en.pdf?la=en.
[32]
The subsidiaries in Vietnam include Midea Consumer Electric (Vietnam) Co.LTD and Midea Air-Conditioning Equipment (Vietnam) Co. LTD, http://www.midea.com/global/about_midea/major_facilities/Overseas_Facilties/201403/t20140319_74645.shtml and, the Annual Report of Midea Group 2015, available at disclosure.szse.cn/finalpage/2016-03-26/1202084987.PDF.
[33]
See introduction of the project from Country Garden Pacific View’s profile, available at https://cgpvforestcity.wordpress.com/about/.
[34]
Except for China-Myanmar BIT signing on December 12 2001, the rest of BITs between China and ASEAN members does not cover NT clauses. For more details, please see http://investmentpolicyhub.unctad.org/IIA/treaty/3272.
[35]
China-Switzerland FTA and China-Singapore FTA, does not contain investment rules. See China Ministry of Commerce website, available at http://fta.mofcom.gov.cn/topic/enpakistan.shtml (last visited on Dec. 2, 2018).
[36]
Jun Xiao, (2011)The ASEAN-China Investment Agreement A regionalization of China’s BITs, 6 Front. Law China 6 pp 241–258, at 249.
[37]
Article 23 and 43 of Vietnam Law on Investment, 2014, Law No. 67/2014/QH13, November 26, 2014, available at http://www.xaydung.gov.vn/web/guest/legal-documents/-/legal/TB4r/en_US/18/250755/55213, last visited on 15 February 2017.
[38]
Article 22(3) (b) of the Vietnam Law on Investment 2014.
[39]
Article 5 and 10 of the Law No. 25/2007 on Investment (Investment Law), available at http://www.flevin.com/id/lgso/translations/JICA%20Mirror/english/3002_UU_25_2007_e.html, last visited on 26 February 2017.
[40]
Article 8 of the ASEAN Comprehensive Investment Agreement.
[41]
Article 46 of the ASEAN Comprehensive Investment Agreement.
[42]
Notice of the General Office of the State Council on Issuing the Special Management Measures (Negative List) for Foreign Investment Access in Pilot Free Trade Zones, see http://www.lawinfochina.com/display.aspx?id=18995&lib=law, last visited 28 February 2017.
[43]
See Huawei Annual Report 2015.
[44]
CHEN Min (2013) Seizing opportunity and harvest the overseas investment-status and experiences of Guangken under the “Going Out” policy, (translation added), 29 China Rubber, pp18-20, p 20.
[45]
ZHANG Lujin and XIE Wei (2014) ‘China’s investors’ choice of leaving Vietnam-haunting 72 hours’ (translation added), China Economic Weekly, 26 May 2014.
[46]
See http://www.sinosure.com.cn/sinosure/english/English.html, last visited on 24 February 2017.
[47]
SHEN Wei (2015) Liberalization and Pluralization of China’s protection standards in international investment treaties’ (translation added), Chinese Journal of Law 4, pp 184-208, 206.
[48]
Article 13 (1) of the ASEAN-China Investment Agreement.
[49]
Article 14 of the ASEAN-China Investment Agreement.
[50]
Article 4 (3) of the Dispute Settlement Mechanism Agreement under the ACFTA.
[51]
Section 4 of the Article 14 of the Investment Agreement.
[52]
See note 5, pp241-58 The conditions for submitting to arbitration are that the submission of the disputes must be within three years of the time at which the investor becomes aware of a breach of an obligation under the Investment Agreement; a ninety day advance written notice to the host state shall be given by the disputing investor before submitting the claim to conciliation or arbitration.
[53]
Article 14 (8) of ASEAN-CHINA Investment Agreement.
[54]
OECD papers shown 21% of the treaties in the sample contain clauses restricting explicitly diplomatic efforts. See Pohl, J., K. Mashigo and A. Nohen (2012) Dispute Settlement Provisions in International Investment Agreements: A Large Sample Survey’, OECD Working Papers on International Investment, 02, OECD Publishing. http://dx.doi.org/10.1787/5k8xb71nf628-en, last visited on 10 March 2018.
[55]
Except for China-Brunei BIT and China-Myanmar BIT, which are both signed after 2000, the rest of BITs between China and ASEAN States are signed in the period of 1980s to 1990s.
[56]
For discussion on generation of China’s BITs, please see note 21, p925.
[57]
Article 10.2 of China-Philippine BIT and Article 7.4 of China -Malaysia BIT. China-Indonesia BIT.
[58]
BITs in this sections are Article 13.3 of China-Singapore BIT, Article 8.3 of China-Laos BIT, Article 9.3 of China-Indonesia BIT, Article 8.3 of China-Vietnam, in comparison with 1985 China-Thailand BIT, the parties of which did not grant the access to the ISD
[59]
Article 10.3 of Bilateral Investment Treaty between China and Philippine).
[60]
Article 9.3 of Bilateral Investment Treaty between Chinaand Brunei).
[61]
Article 13.5 of BIT (China-Singapore) and Article 7.4 of BIT (China-Malaysia).
[62]
See note 21 at 932.Also see SHAN Wenhua and et al. International Protection of China’s Outward Energy Investment- Survey and Regional Research (translation added), Beijing: Tsinghua University Press 2014, page 46.
[63]
Paragraph 10 of Government of the Lao People’s Democratic Republic v. Sanum Investments Ltd. [2015] SGHC 15, available at http://www.singaporelaw.sg/sglaw/laws-of-singapore/case-law/free-law/high-court-judgments/15860-government-of-the-lao-people-rsquo-s-democratic-republic-v-sanum-investments-ltd-2015-sghc-15.
[64]
Paragraph 121-126 of Sanum v. Laos, [2015] SGHC 15.
[65]
Sanum Investments Ltd v. Government of the Lao People’s Democratic Republic [2016] SGCA 57 available at http://www.supremecourt.gov.sg/docs/default-source/module-document/judgement/judgment-for-ca-139-167-of-2015-(final)-pdf.
[66]
Foreign Ministry Spokesperson Hua Chunying's Regular Press Conference on October 21, 2016, available at http://www.fmprc.gov.cn/mfa_eng/xwfw_665399/s2510_665401/2511_665403/t1407743.shtml, last visited on 16 March 2017.
[67]
See Article 138 of the Macau Basic Law.
[68]
Available at http://www.doj.gov.hk/eng/laws/table2ti.html, and João Santos Filipe, ’Bilateral Investment Treaties Quandary’, 28 Politics, (January, 2015) see http://macaubusinessdaily.com/Politics/Bilateral-Investment-Treaties-Quandary.
[69]
See http://investmentpolicyhub.unctad.org/IIA/CountryBits/42, last visited on 16 February 2017.
[70]
Ten of these areas are included in this year’s ranking on the ease of doing business: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. See World Bank Group, ’Doing Business 2016-Measuring Regulatory Quality and Efficiency’, A World Bank Group Flagship Report, 2016, 13th edition. p5, available at espanol.doingbusiness.org/~/media/.../DoingBusiness/...Reports/.../DB16-Full-Report.pdf, last visited on 5 February 2017
[71]
Available at https://www.miga.org/who-we-are, last visited on 8 March 2017.
[72]
Article 11 of the Convention Establishing the Multilateral Investment Guarantee Agency.
[73]
Wang Guiguo, ‘Investor-State Dispute Settlement in China’, Transnational Dispute Management, 5 (2011) page 7.
[74]
Karl P.Sauvant and Michael D. Nolan (2015) China’s Outward FDI and International Investment Law, Journal of International Economic Law, 18, Nov.pp893-934.
[75]
Karl P.Sauvant and Michael D. Nolan (2015) China’s Outward FDI and International Investment Law, Journal of International Economic Law, 18, Nov.pp893-934.
[76]
Karl P.Sauvant and Michael D. Nolan (2015) China’s Outward FDI and International Investment Law, Journal of International Economic Law, 18, Nov.pp893-934, page 933.
[77]
Claudia Annacker (2011) Protection and Admission of Sovereign Investment under Investment Treaties, Chinese Journal of International Law Vol. 10. No.3, 531-564,531.
[78]
CSOB v Slovak Republic, ICSID Case No. ARB/97/4, Decision on Jurisdiction, 24 May 1999, paras 23–27.
[79]
2014 Administrative Measures for Overseas Investments, http://www.mofcom.gov.cn/article/b/c/201409/20140900723361.shtml.The proportion of shares in control or management of Chinese MNEs is 10 percent. For detail, see Article 2 of 2006 Statistical System of Foreign Direct Investment, (translation added) hzs.mofcom.gov.cn/accessory/201102/1297930121981.pdf., at page 19.
[80]
Huawei Annual Report 2015, https://www.huawei.com/en/press-events/annual-report/2015, at page 121, last visited on 8 March 2018.
[81]
YAO Meizhen, Section of articles of YAO Meizhen, (translation added), Wuhan: Wuhan University Press, 2010, Page 33 and page 62.
Browse journals by subject