Selective Investment Liberalisation: National Treatment, Capital Export, and Expropriation

Due to its simultaneous role asCapitalcapital import capital importer and capital exporterCapitalcapital exporter, China follows three domestic endeavours: First, to protect core sectors pertaining to national security; second, to protect capital exportCapitalcapital export allowing access to natural resources and technologies; and third, to attract foreign investments to stimulate competition in needed –and thus unprotected– sectors. Accordingly, China applies a classical version of the Developmental State model to the legal framework governing investments. Concurrently, China pursues socialist market economy goals where State sectorStateState sector, collective ownershipOwnershipcollective ownership, and public interests prevail. Therefore, foreign investments remain vulnerable to expropriation. To achieve these objectives, China relies on three strategic pillars: government interventionGovernment intervention in the economy, technology transferTechnologytechnology transfer justified by developing country statusDeveloping country status, and rule-based governanceRule-based governance. These pillars form this chapter’s central arguments structured in three parts. First, government interventionGovernment intervention in the economy, and especially the role of State-owned enterprises, remains China’s key priority. Second, and analogous to merchandise trade liberalisation, China capitalises on developing country statusDeveloping country status to justify technology transfer through investments thanks to Special and Differential Treatment provisions under WTO lawWorld Trade OrganisationWTO law. Third, China creates rule-based governanceRule-based governance based on transparencyTransparency and investor-stateDispute settlementinvestor-state dispute settlement dispute settlementDispute settlement provisions to render enforcement more predictable, stabilise the investment regime, and enhance China’s credibility as a home and host state.