Foreign Investment and Trade Disputes in China

By Matthew McConkey, Legal Counsel, Coudert Brothers LLP, Beijing

China represents tremendous opportunities for most investors. With opportunities come risks, however. An example is in foreign trade. Despite all of the hype over China, it is surprising that more trade conflicts are not reported among foreign investors in China. With the growing number of foreign individuals and entities assuming the risk and investing in China's manufacturing industry-one saddled by non-market economy status and which has in recent years seen anti-dumping duties ranging from a few percent to a couple hundred percent-why isn't there a greater concern about trade disputes?

There are a number of risk factors surrounding investments in mainland China. Foreign investors and observers commonly site legal uncertainties as a prime cause of concern. Intellectual property rights protection remains another primary target for criticism. Trade disputes also have undoubtedly made the list of general concerns, but are not considered seriously enough. Few investors seem genuinely troubled by the likelihood that anti-dumping and safeguard measures taken by China's trade partners will disrupt their operations or investments in the mainland. This is a troubling oversight and should be reconsidered given that China's integration into the world economy has expanded the sphere of those with an ownership interest in China's manufacturing base. Some private equity firms, which traditionally have held quite a few manufacturing companies in their portfolios, are now beginning to buy up US or EU manufacturers, with the intention of relocating their production to China. In addition, many investors have become shareholders in Chinese manufacturers listed in Hong Kong and on other stock exchanges.