Uncertain prospects

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The July/August issue of China Business Law Journal features our annual comprehensive review of China’s legal services market. The review is a series of four stories providing in-depth analysis of the most important regulatory changes and market trends, as well as the key concerns of corporate counsel in the first half of this year.

CBLJ1808-All-Final-coverInto the storm investigates the more stringent investment review rules that Chinese investors will face in developed overseas markets. Levelling up looks at recent reforms and new regulations aiming to make China a more open, stable and efficient economy. Against the flow explores the new trends of competition in the legal services market. In-house focus features the observations of the Association of Corporate Counsel and our editorial board members on new trends and challenges in the in-house counsel community.

Chinese companies planning to invest overseas now face great pressure. The US legislature has empowered the Committee on Foreign Investment in the United States (CFIUS) with a much broader remit to scrutinize and block any foreign investment that the committee wants to define as a threat to national security. The EU is also in the process of setting up a common regulatory framework to review foreign investment.

The uncertainty lingering over investment, and ongoing trade tensions, have concerned many corporate counsel. Legal expertise is not enough. Knowledge of geopolitics has also become important.

Developing countries often do not hold strong suspicion towards foreign investors, but there are other risks such as political instability, weak intellectual property (IP) protection, and different legal systems. They may have some legal requirements that foreign investors are not well aware of. For example, some Southeast Asian countries have strict anti-corruption regulations. Therefore, sufficient risk assessment and good compliance practice will always be necessary.

In China, the government is making efforts to further open up its economy. This year marks the 40th anniversary since Deng Xiaoping, then leader of China, decided to enshrine “reform and opening-up” as one of the country’s fundamental national policies in 1978. In June, the Chinese government issued the 2018 versions of two negative lists for nationwide foreign investment and for foreign investment in free trade zones, respectively. Both negative lists have significantly reduced the number of industries where foreign investment is restricted, and have opened many key sectors such as finance, manufacturing of cars, ships and aircraft, etc.

Strong protection of IP rights is another key objective of China. Large claims have been supported by Chinese courts, imposing unprecedented pressure on infringers. Encouraged by China’s efforts to improve IP protection, an increasing number of rights holders are willing to defend themselves through legal proceedings.