China’s recent changes in laws governing foreign companies operating within its borders have raised questions about their true intentions. While on the surface, these changes may seem like a major step towards protecting foreign investors, there is more to it than meets the eye.
The Chinese Communist Party (CCP) sees these new laws as a way to integrate further into the global economy and attract foreign investment and manufacturing. The Supreme People’s Court and other legal establishments are leaning towards implementing these laws. Some cases involving foreign jurisdictions, such as the UK, the United States, Mexico, Tajikistan, and Hong Kong, are already in progress. This application of foreign laws in Chinese courts is seen as a way to protect foreign interests in China.
However, the timing of these changes raises suspicions. The need for China to adapt its laws to protect foreign companies and investors should have been addressed when it joined the World Trade Organization in 2000. In reality, foreign investors and companies were willing to overlook the lack of legal protection in China in order to benefit from low manufacturing costs. Intellectual property theft, competition from knockoffs, and even the theft of entire factories were considered part of the cost of doing business in China.
But the landscape has changed. Western companies can no longer afford to compete against their own stolen technology, designs, and products. China’s business advantages, such as low-cost labor, are no longer as attractive, and many companies are facing extinction due to competition from adversarial Chinese companies controlled by the CCP.
So, what is the real reason behind China’s new foreign-related laws? While the need for legal services for China’s expanding business presence abroad is a factor, there are other considerations. Tensions between Beijing and its trading partners have been growing, and countries are becoming more aware of the poor working conditions in Chinese factories. Companies are searching for alternative manufacturing bases that are more worker-friendly, leading to a trend of nearshoring to countries like Vietnam, India, Turkey, and Mexico.
China is using every angle to entice companies to continue doing business in the country. The Eurozone and the United States are reducing their reliance on China-based manufacturing, posing a risk to China’s economy. Domestically, China is facing challenges such as lower demand, deflation, high unemployment, a debt crisis, an aging population, and collapsing birth rates. Without strong economic growth, the CCP’s legitimacy is at stake.
In conclusion, China’s new foreign-related laws may appear to be a step towards protecting foreign investors, but the timing and underlying motivations suggest otherwise. The changing business landscape and China’s economic challenges are driving these changes. Foreign companies must carefully consider the risks and benefits of doing business in China in light of these developments.
