Investing in China’s Telecommunications Market: Reflections on the Rule of Law and Foreign Investment in China

Chuang, Leontine D. | January 1, 2000

The lack of clarity in China’s investment laws has translated into an investment environment that is often uncertain, risky, and mired in red tape. In fact, there have been cases where foreign corporations have invested in joint ventures following what they thought to be all the requisite guidelines, only to find out after the money had exchanged hands that something was terribly wrong with the entire agreement. A perfect example of this is the birth, development, and eventual demise of the ill-fated China-China-Foreign (hereinafter “CCF”) investment vehicles used for investment in China’s telecommunications industry in the past few years. This comment will use CCF investment in China’s telecommunications industry as a case study to show how the vague legal framework for foreign investment in China can make investment in China an unpredictable venture. It will also discuss how a weak rule of law has contributed to developing this vague legal framework through promoting the existence of multiple interpretations of each law. Furthermore, this comment will reflect on the impact of the U.S.-China Bilateral WTO Agreement (hereinafter “U.S.-China WTO Agreement”), signed in November 1999, and China’s impending accession into the World Trade Organization (hereinafter “WTO”) on the case study. It will also touch upon the possible ramifluations that entry into the WTO will have on the rule of law in China.