SSRN Id2849063

OPENING PRE-ESTABLISHMENT NATIONAL
TREATMENT IN INTERNATIONAL
INVESTMENT AGREEMENTS: AN EMERGING
“NEW NORMAL” IN CHINA?
Qianwen Zhang＊
ABSTRACT
Pre-establishment national treatment with a negative list is
gradually becoming the “new normal” in Chinese international
investment law. The history of China’s approach to national
treatment in Chinese international investment agreements (IIAs) can
be divided into three stages: First, China’s almost complete rejection
of national treatment in the 1980s and 1990s; second, its conditional
acknowledgment of post-establishment national treatment from
2000-2013; and third, its adoption of pre-establishment national
treatment with a negative list after 2013. Each of the stages accords
with China’s internal investment development, as well as its role in
the international economy. The recent shift towards
pre-establishment national treatment is reflected in both China’s
domestic investment system reform and its evolving approach to
IIAs: Namely, that China is adapting to prevailing international
＊
Qianwen Zhang is a Ph.D. candidate of international law in Sichuan University School of Law,
China. Qianwen received her LL.B in Xiamen University, and was awarded a B.A in economics in
Xiamen University. She received her LL.M degree in McGill University, and a master of law in
Xiamen University Law School. From September 2010 to September 2011, Qianwen was an
associate fellowship in the Centre for International Sustainable Development Law. Qianwen has
been working for Chengdu Municipal Development and Reform Commission since 2012. Her
research interests include international investment law, dispute resolution and laws of territorial
dispute. Much gratitude is extended to an anonymous reviewer for very insightful advice; and for
Vita Yi-Ju Wu, Kyle Yu-Kai Chen, Chi Huang, Henry Wang and Yan-Di for their excellent
technical assistance. The author can be reached at: cdzqw@hotmail.com.
438 AJWH [VOL. 11: 437
investment law standards. This shift is having a profound influence

on China’s legislative and administrative reforms. Ultimately, the
implied liberal doctrine may bring both cooperative opportunities
and challenges for both China and its investment and trade partners.
KEYWORDS: International Investment Agreements, National Treatment,

pre-establishment, post-establishment
2016] “NEW NORMAL” OF NATIONAL TREATMENT IN SINO-FOREIGN BITS 439
I. INTRODUCTION
At the 2014 Asia-Pacific Economic Cooperation forum, President Xi

Jinping pointed out that the Chinese economy is experiencing a “new
normal”.1 The “new normal” is reflected by several new features, including
the shift of economic growth from high speed to medium-to-high speed, the
transformation and upgrading of economic structures and among others.2 Is
this economic shift also reflected in China’s evolving approach to
pre-establishment national treatment with a negative list? Is the
pre-establishment national treatment with a negative list approach
becoming the “new normal” in China with respect to Chinese International
Investment Agreements (hereinafter “IIAs”) practice? This article proceeds
as follows. Part 1 offers an overview of post-establishment national
treatment, pre-establishment national treatment and the negative list. Part 2
and 3 respectively explains China’s approach to national treatment in
Chinese IIAs prior to 2013 and post-2013. Moreover, relevant factors
giving rise to China’s choice are also explained. Part 4 discusses, if this
approach is in fact the “new normal” in China, the domestic implications
on China’s legislative and administrative reforms, including the potential
impact of this approach on China’s domestic investment system reform, as
well as the external implications on the Sino-foreign IIA negotiations and
international investment cooperation. Part 5 concludes.
II. PRE-AND POST-ESTABLISHMENT NATIONAL TREATMENT
Developed with the aim of promoting the inflow of foreign direct

investment (hereinafter “FDI”), national treatment remains one of the most
significant provisions in bilateral investment treaties (hereinafter “BITs”).
National treatment derives from an objective to protect foreign investors
and their investments that seek to ensure they are provided with treatment
equivalent to that of domestic investors and investment. National treatment
clauses can be found in many intra-European BITs: These clauses generally
identify the host state’s obligations to accord foreign investors and their
investments “a treatment no less favorable than that which the host state
accords, in like circumstances, to its own investors”.3
1
Xi’s “New Normal” Theory, XINHUA (Nov. 9, 2014, 10:40 PM), http://news.xinhuanet.com/engli
sh/china/2014-11/ 09/c_133776839.htm.
2
For example, old key engines such as property and manufacturing suffered from oversupply,
while new engines such as high-tech industries and internet-related businesses saw booming
growth. “New” and “Normal” in Xi’s “New Normal” Theory, CHINANEWS (Aug. 10, 2014),
www.chinanews.com/ gn/2014/08-10/6477530.shtml.
3
For a review of different national-treatment clauses in bilateral investment treaties [hereinafter
440 AJWH [VOL. 11: 437
There are two dominant BIT models of admission and establishment:

Namely, the post-establishment model and the pre-establishment model.4
Having been extensively used over the past several decades, the
post-establishment model accords national treatment solely to foreign
investments, and both admission and establishment are contingent upon
conformity with domestic laws.5 A case in point is the Malta–Netherlands
BIT, which provides no general right of admission or establishment rights.6
The pre-establishment model, on the other hand, accords national treatment
not only to foreign investments, but also to foreign investors. The extension
of national treatment to the admission phase de facto allows for market
access.7 Although they are the world’s most important capital-exporting
countries, the United States, Canada, and Japan have always been prone to
pre-establishment commitments so as to enlarge the scope in which
national treatment applies.8 Prior to 2009, the pre-establishment national
treatment approach was still a minority group that embraced the right of
entry into the host state. 9 Yet the group has recently expanded. In
mid-2013, there were already more than 77 countries that had adopted the
pre-establishment national treatment model, reflecting an increasing liberal
approach to national treatment clause in IIAs. 10 Indeed, the
pre-establishment model, has its origins in United States-based treaty
practice. The pre-establishment model initially appeared in various United
States friendship, commerce, and navigation (hereinafter “FCN”) treaties,
and its was subsequently incorporated into the United States 1994 Model
BIT, as well as its most recent 2012 version.111213 The post-establishment
BITs], see RUDOLF DOLZER & MARGRETE STEVENS, BILATERAL INVESTMENT TREATIES 63-65
(1995).
4
U.N. CONFERENCE ON TRADE & DEV., NATIONAL TREATMENT, at 10, U.N. Doc.
UNCTAD/ITE/IIT/11 (Vol. IV), U.N. Sales No. E.99.II.D.16 (1999).
5
ANDREW NEWCOMBE & LLUÍS PARADELL, LAW AND PRACTICE OF INVESTMENT TREATIES:
STANDARDS OF TREATMENT 134 (2009).
6
Agreement Concerning the Encouragement and Reciprocal Protection of Investments,
Malta–Neth., Sept. 10, 1984, 1458 U.N.T.S. 81.
7
August Reinisch, The EU on the Investment Path—Quo Vadis Europe? The Future of EU BITs
and other Investment Agreements, 12 SANTA CLARA J. INT’L L. 111, 128 (2014), available at
http://digitalcommons.law.scu.edu/scujil/vol12/iss1/6.
8
LUKE ERIC PETERSON, HUMAN RIGHTS AND BILATERAL INVESTMENT TREATIES: MAPPING THE
ROLE OF HUMAN RIGHTS LAW WITHIN INVESTOR-STATE ARBITRATION 12 (2009), available at
http://publications.gc.ca/collections/collection_2012/dd-rd/ E84-36-2009-eng.pdf.
9
See NEWCOMBE & PARADELL, supra note 5, at 158.
10
Ministry of Commerce, People’s Republic of China: More than 77 Countries Have Adopted
Pre-establishment National Treatment with a Negative List Model, PEOPLE’S DAILY ONLINE (July
12, 2013 8:52 AM), http://finance.people.com.cn/n/2013/0712/c1004-22173506.html.
11
For example, Treaty and Protocol Between the United States of America and Japan Regarding
Friendship, Commerce and Navigation, U.S.–Japan, art. VII, Apr. 2, 1953, 4 U.S.T. 2063, 206
U.N.T.S. 143. See also Herman Walker Jr., Provisions on Companies in United States Commercial
Treaties, 50(2) AM. J. INT’L L. 373, 385 (1956).
12
UN CONFERENCE ON TRADE & DEV., INTERNATIONAL INVESTMENT INSTRUMENTS: A
COMPENDIUM, at 184, U.N. Doc. UNCTAD/DTCI/30 (Vol. II) (1996).
model has long been incorporated into many European BITs. Given the
implementation of the Lisbon Treaty in December 2009, however, the
traditional post-establishment approach is likely to be replaced by the
pre-establishment approach, as suggested by recently negotiated European
BITs and free trade agreements (hereinafter “FTAs”).14 As for Canada, in
addition to its tax reform programs, the development of a friendly
investment environment may also help the country to attract more foreign
investment.15
It is also notable that some treaties promise to accord national
treatment during the pre-investment phase, they do so by limiting national
treatment to particular economic sectors, subsectors, and activities. For
example, the United States excludes a variety of sectors such as financial
services and telecommunications from the application of pre-establishment
national treatment.16 This is the “pre-establishment with a negative list
approach”, which offers full rights of entry and establishment based on the
better of national treatment, subject only to reserved “negative” lists of
industries to which such rights do not apply.17 In other words, a “negative
list” refers to reserved activities or excepted industries that national
treatment does not apply. 18 The contracting parties are not allowed to
introduce new non-conforming measures beyond those included in the
negative list, thereby implying a “standstill” commitment.19 The negative
list is designed to add transparency in FDI regulations by permitting
foreign investors to ascertain quickly whether their sector of activity faces
any restrictions.20 This approach accords well with neo-liberal views and
may reflect the impossibility for states to cultivate complete “free
13
2012 U.S. Model Bilateral Investment Treaty, U.S. DEP’T OF STATE & U.S. TRADE
REPRESENTATIVE, art. 3 (2012), http://www.state.gov/documents/organization/188371.pdf.
14
For example, Comprehensive Economic and Trade Agreement, Can.–E.U., Ch. 8, § C, art. 8.6
stipulates:
Each Party shall accord to investors of the other Party and to covered investments,
treatment no less favourable than the treatment it accords, in like situations to its own
investors and to their investments with respect to the establishment, acquisition,
expansion, conduct, operation, management, maintenance, use, enjoyment and sale or
disposal of their investments in its territory.
15
For more information, see Vijay Jog & Jianming Tang, Tax Reforms, Debt Shifting and Tax
Revenues: Multinational Corporations in Canada, 8 INT’L TAX & PUB. FIN. 5, 21 (2001), available
at http://www.springerlink.com/content/j080627m717030m3/fulltext.pdf.
16
U.S. DEP’T OF STATE & U.S. TRADE REPRESENTATIVE, supra note 13, arts. 1, 20.
17
“Pre-establishment with a negative list approach” is one of the five major categories or models
regarding approaches to entry and establishment concluded by UNCTAD. See U.N. CONFERENCE
ON TRADE & DEV., ADMISSION AND ESTABLISHMENT, at 3-4, U.N. Doc. UNCTAD/ITE/IIT/10 (Vol.
II), UN Sales No. E.99.II.D.10 (1999).
18
See id. at 5.
19
UN CONFERENCE ON TRADE & DEV., PRESERVING FLEXIBILITY IN IIAS: THE USE OF
RESERVATIONS, at 19, U.N. Doc. UNCTAD/ITE/IIT/2005/8, U.N. Sales No. E.06.II.D.14 (2006).
20
See THOMAS POLLAN, LEGAL FRAMEWORK FOR THE ADMISSION OF FDI 136-37 (2006).
442 AJWH [VOL. 11: 437
investment”: Namely, free movement of investments in the states.
III. CHINA’S APPROACH TO NATIONAL TREATMENT PRIOR TO 2013
A. Introduction to China’s Initial Approach to National Treatment
None of the valid Sino-foreign BITs has adopted the pre-establishment

national treatment approach; however, statements of national treatment
obligations vary among the current Sino-foreign BITs. 21 In general,
China’s attitude towards national treatment has been changing. Many of the
early Sino-foreign BITs do not accord national treatment at all. According
to the present author’s calculation, the number of valid Sino-foreign BITs
that do not include national treatment clause or non-discrimination
principles is 57 (or 52%) out of the total 110 BITs released by the Ministry
of Commerce of the People’s Republic of China.22 Furthermore, with the
21
See Agreement on Promotion, Facilitation and Protection of Investment art. 3, China–Japan–S.
Kor., May 13, 2012, http://www.mofa.go.jp/announce/announce/2012/5/pdfs/0513_01_01.pdf. See
also Agreement Concerning the Encouragement and Reciprocal Protection of Investment,
China–Japan, art. 3(2), Aug. 27, 1988, 28 I.L.M. 575.
22
These 57 Sino-foreign BITs are as follows: Agreement on the Mutual Protection of Investments,
China–Swed., Mar. 29, 1982, 1350 U.N.T.S. 247; Agreement on Mutual Protection of Investments,
China–Nor., Nov. 21, 1984; Agreement Concerning the Encouragement and Reciprocal Protection
of Investments, China–It., Jan. 28, 1985; Agreement Concerning the Encouragement and
Reciprocal Protection of Investments, China–Austria, Sept. 12, 1985; Agreement on the Reciprocal
Encouragement and Protection of Investments, China–Pol., June 7, 1988; Agreement Concerning
the Reciprocal Encouragement and Protection of Investments, China–Bulg., June 27, 1989;
China–Hung., May 29, 1991; Agreement for the Encouragement and Reciprocal Protection of
Investments, China–Greece, June 25, 1992; Agreement for the Promotion and Reciprocal
Protection of Investments, China–Ukr., Oct. 31, 1992, 1849 U.N.T.S. 81; Agreement Concerning
the Encouragement and Reciprocal Protection of Investments, China–Mold., Nov. 6, 1992;
Agreement for the Promotion and Mutual Protection of Investments, China–Belr., Jan. 11, 1993,
1901 U.N.T.S. 199; Agreement Concerning the Encouragement and Reciprocal Protection of
Investments, China–Alb., Feb. 13, 1993; Agreement Concerning the Encouragement and
Reciprocal Protection of Investments, China–Croat., June 7, 1993, 1849 U.N.T.S. 185; Agreement
on the Promotion and Reciprocal Protection of Investments, China–Est., Sept. 2, 1993, 1849
U.N.T.S. 293; Agreement Concerning the Encouragement and Reciprocal Protection of
Investments, China–Lith., Nov. 8, 1993; Agreement Concerning Encouragement and Reciprocal
Protection of Investments, China–Rom., July 12, 1994, 1957 U.N.T.S. 267; Agreement for the
Promotion and Protection of Investments, China–Thai., Mar. 12, 1985, 1443 U.N.T.S. 31;
Agreement on the Promotion and Protection of Investments, China–Sing., Nov. 21, 1985, 1443
U.N.T.S. 279; Agreement on the Reciprocal Promotion and Protection of Investments, China–Sri
Lanka, Mar. 13, 1986; Agreement Concerning the Reciprocal Encouragement and Protection of
Investments, China–Malay., Nov. 21, 1988; Agreement on the Reciprocal Encouragement and
Protection of Investments, China–Pak., Feb. 12, 1989; Agreement Concerning the Reciprocal
Promotion and Protection of Investments, China–Turk., Nov. 13, 1990; Agreement Concerning the
Encouragement and Reciprocal Protection of Investments, China–Mong., Aug. 25, 1991;
Agreement Concerning the Encouragement and Reciprocal Protection of Investments, China–Kyrg.,
May 14, 1992; Agreement Concerning the Encouragement and Reciprocal Protection of
Investments, China–Arm., July 4, 1992; Agreement Concerning Encouragement and Reciprocal
Protection of Investments, China–Phil., July 20, 1992, 1994 U.N.T.S. 255. Agreement for the
exception of the 2000 China–Iran BIT and the 2007 China–Cuba BIT, the
remaining Sino-foreign BITs that do not include national treatment clause
or non-discrimination principles were signed in the 1980s and 1990s,
thereby making them part of the first generation of Chinese BITs. A
breakthrough by explicitly incorporating the principle of national treatment
in Sino-foreign BITs occurred with the 1986 China–United Kingdom BIT.
Article 3(3) of this BIT states that the contracting parties shall accord
treatment “to the investments of nationals or companies of the other
Contracting Party the same as that accorded to its own nationals or
Promotion and Reciprocal Protection of Investments, China–Kaz., Aug. 10, 1992, 1849 U.N.T.S.
43; Agreement for the Promotion and Reciprocal Protection of Investments, China–Turkm., Nov.
21, 1992, 1971 U.N.T.S. 85; Agreement Concerning the Encouragement and Reciprocal Protection
of Investments, China–Viet., Dec. 2, 1992, 1901 U.N.T.S. 167; Agreement Concerning the
Encouragement and Reciprocal Protection of Investments, China–Laos, Jan. 31, 1993, 1849
Investments, China–Taj., Mar. 9, 1993, 1849 U.N.T.S. 141; Agreement Concerning the
Encouragement and Reciprocal Protection of Investment, China–Geor., June 3, 1993; Agreement
for the Promotion and Protection of Investments, China–U.A.E., July 1, 1993, 1849 U.N.T.S. 215;
Agreement Concerning the Encouragement and Reciprocal Protection of Investments, China–Azer.,
Mar. 8, 1994, 1901 U.N.T.S. 227; Agreement Concerning Encouragement and Reciprocal
Protection of Investments, China–Oman, Mar. 18, 1995, 1957 U.N.T.S. 331; Agreement for the
Promotion and Protection of Investments, China–Cambodia, July 19, 1996; Agreement Concerning
the Reciprocal Promotion and Protection of Investments, China–Syria, Dec. 9, 1996; Agreement
Concerning the Encouragement and Reciprocal Protection of Investments, China–Qatar, Apr. 9,
1999; Agreement Concerning the Encouragement and Reciprocal Protection of Investment,
China–Bahr., June 17, 1999; Agreement on Reciprocal Promotion and Protection of Investment,
China–Iran, June 22, 2000; Agreement on the Promotion and Protection of Investments,
China–N.Z., Nov. 22, 1988, 1787 U.N.T.S. 185; Agreement Concerning the Encouragement and
Reciprocal Protection of Investments, China–Ghana, Oct. 12, 1989; Agreement for the Reciprocal
Promotion and Protection of Investments, China–Mauritius, May 4, 1996; Agreement on the
Encouragement and Reciprocal Protection of Investments, China–Zim., May 21, 1996; Agreement
on the Encouragement and Reciprocal Protection of Investments, China–Alg., Oct. 17, 1996;
China–Sudan, May 30, 1997; Agreement Concerning the Encouragement and Reciprocal
Protection of Investments, China–Cape Verde, Apr. 21, 1998; Agreement Concerning the
Encouragement and Reciprocal Protection of Investments, China–Eth., Nov. 5, 1998; Agreement
Concerning the Encouragement and Reciprocal Protection of Investments, China–Bol., May 8,
1992; Agreement on the Promotion and Reciprocal Protection of Investments, China–Arg., Nov. 5,
1992, 1862 U.N.T.S. 3; Agreement Concerning the Encouragement and Reciprocal Protection of
Investments, China–Uru., Dec. 2, 1993; Agreement for the Promotion and Reciprocal Protection of
Investment, China–Ecuador, Mar. 21, 1994; Agreement Concerning the Encouragement and the
Reciprocal Protection of Investment, China–Chile, Mar. 23, 1994; Agreement Concerning the
Encouragement and Reciprocal Protection of Investments, China–Peru, June 9, 1994, 1901
Investments, China–Jam., Oct. 26, 1994, 1957 U.N.T.S. 303; Agreement Concerning the
Encouragement and Reciprocal Protection of Investments, China–Cuba, Apr. 24, 1995; Agreement
Concerning the Encouragement and Reciprocal Protection of Investments, China–Barb., July 20,
1998. All the Sino-foreign BIT texts are available at the official website of Ministry of Commerce
of the People’s Republic of China: Woguo Dui Wai Qianding Shuangbian Touzi Xieding Yilanbiao
[The List of Sino-foreign Bilateral Investment Treaties], ZHONG HUA REN MIN GONG HE GUO
SHANGWUBU TIAOYUE FALU SI [DEPARTMENT OF TREATY AND LAW, MINISTRY OF COMMERCE OF
THE PEOPLE’S REPUBLIC OF CHINA], http://tfs.mofcom.gov.cn/article/Nocategory/201111/20
111107819474.shtml (last visited Sept. 19, 2016).
444 AJWH [VOL. 11: 437
companies”. Yet there are some elastic descriptions in this early national
treatment clause, such as “to the extent possible” and “in accordance with
the stipulations of its laws and regulations”. Another marker of progress is
the 1988 China–Japan BIT because it excludes the aforementioned elastic
expressions. Article 3(2) of the 1988 China–Japan BIT stipulates that “the
treatment accorded by either Contracting Party within its territory to
nationals and companies of the other Contracting Party with respect to
investment, returns and business activities in connection with the
investment shall not be less favourable than that accorded to nationals and
companies of the former Contracting Party,” but this treatment is subject to
the exceptional circumstances of “public order, national security or sound
development of national economy”. 23 An even more comprehensive
national treatment requirement can be found in the 1992 China–Korea BIT,
whose Article 3(2) stipulates that “investors of either State shall within the
territory of the other State be guaranteed treatment no less favourable than
that accorded to investors of the latter State, with respect to investments,
returns and business activities in connection with the investment.” This BIT
avoids the limitations articulated in the 1988 China–Japan BIT. The 1988
China–Japan BIT and the 1992 China–Korea BIT seem to have served as
means of experimenting with the post-establishment national treatment
among the first generation of Chinese BITs. Since then, China has sought to
implement post-establishment national treatment with carve-outs for
existing non-conforming measures. This list of non-conforming measures
has been in place for decades and can be seen in the recent 2012
China–Canada BIT.24
There are generally three types of descriptions of national treatment
(including the non-discrimination principle) that characterise Sino-foreign
BITs: The principle of non-discrimination only; the national treatment
clause only; or the principle of non-discrimination and the national
treatment clause. Further analysis of these three categories follows below:
1. The principle of non-discrimination only: The primary purpose of
national treatment in BITs is to prevent the host state from
discriminating against investors and investments on the basis of
nationality. 25 Therefore, the non-discrimination principle can be
23
Agreement Concerning the Encouragement and Reciprocal Protection of Investment, supra note
21, Protocol ¶ 3.
24
Agreement for the Promotion and Reciprocal Protection of Investment, Can.–China, art. 6(3),
Sept. 9, 2012 states:
The concept of “expansion” in the Article applies only with respect to sectors not
subject to a prior approval process under the relevant sectoral guidelines and
applicable laws, regulations and rules in force at the time of expansion. The expansion
may be subject to prescribed formalities and other information requirements.
25
Marvin Roy Feldman Karpa v. United Mexican States, ICSID Case No. ARB(AF)/99/1, ¶ 181
regarded as important to the spirit of national treatment. In the

Sino-foreign BITs that contain the non-discrimination principle, there
are always some elastic expressions, such as “without prejudice to its
laws and regulations”, that are designed to limit the application of the
principle. One statement can be found in Article 3(b) of the 1988
China–Australia BIT, which stipulates that the contracting parties,
“without prejudice to its law, shall not impair by unreasonable or
discriminatory measures the management, maintenance, use,
enjoyment or disposal of investments.” The number of valid
Sino-foreign BITs that fall into this category is 14, or 13% of the total
110 BITs.26
2. National treatment clause only: (a) The same treatment. Restrictions
such as “to the extent possible” and “in accordance with the
stipulations of its laws and regulations” always accompany with the
requirement of the same treatment. For instance, Article 3(3) of the
1997 China–Macedonia BIT states that “either Contracting Party shall,
to the extent possible, accord treatment in accordance with the
stipulations of its laws and regulations to the investments of investors
of the other Contracting Party the same as that accorded to its own
investors.” There are four Sino-foreign BITs that fall into this category
and description, suggested the description’s limited implementation.27
(b) No less favourable treatment. This is the description that is
currently used and that may bear a close link with national treatment in
(Dec. 16, 2002).

26
These 14 Sino-foreign BITs are as follows: Agreement Concerning the Encouragement and
Reciprocal Protection of Investments, China–Den., Apr. 29,1985, 1443 U.N.T.S. 69; Agreement for
the Promotion and Protection of Investments, China–Kuwait, Nov. 23, 1985; Agreement for the
Promotion and Reciprocal Protection of Investments, China–Isr., Apr. 10, 1995, 2620 U.N.T.S. 53;
Agreement Concerning the Encouragement and Reciprocal Protection of Investments, China–Leb.,
June 13, 1996; Agreement Concerning the Encouragement and Reciprocal Protection of
Investments, China–Yemen, Apr. 10, 2002; Agreement on the Promotion and Protection of
Investments, China–S. Kor., Sept. 7, 2007; Agreement on the Reciprocal Encouragement and
Protection of Investments, China–Austl., July 11, 1988; Agreement for the Promotion and
Protection of Investments, China–Papua N.G., Apr. 12, 1991; Agreement Concerning the
Encouragement and Reciprocal Protection of Investments, China–Egypt, Apr. 21, 1994, 1988
Investments, China–Morocco, Mar. 27, 1995; Agreement for the Promotion and Reciprocal
Protection of Investments, China–Gabon, May 9, 1997; Agreement for the Reciprocal Promotion
and Protection of Investments, China–Nigeria, Aug. 27, 2001; Agreement Concerning the
Reciprocal Encouragement and Protection of Investments, China–Tunis., June 21, 2004;
Agreement for the Promotion and Protection of Investments, China–Eq. Guinea, Oct. 20, 2005,
1443 U.N.T.S. 69.
27
These four Sino-foreign BITs are as follows: Agreement Concerning the Promotion and
Reciprocal Protection of Investments, China–U.K., May 15, 1986; Agreement Concerning the
Encouragement and Reciprocal Protection of Investments, China–Slovn., Sept. 13, 1993;
Agreement Concerning the Promotion and Reciprocal Protection of Investments, China–Icel., Mar.
31, 1994, 1998 U.N.T.S. 93; Agreement Concerning the Encouragement and Reciprocal Promotion
of Investments, China–Maced., June 9, 1997.
446 AJWH [VOL. 11: 437
the field of international trade. Article III (4) of the General Agreement
on Tariffs and Trade provides that the contracting parties “shall be
accorded treatment no less favourable than that accorded to like
products of national origin in respect of all laws, regulations and
requirements affecting their internal sale, offering for sale, purchase,
transportation, distribution or use.” 28 A similar national treatment
clause in BITs is that “each Contracting Party shall accord to investors
of the other Contracting Party and associated investments treatment not
less favorable than that accorded to its own investors and associated
investments in like circumstances.” 29 To date, there are 13
Sino-foreign BITs that fall into this category and description.30
3. The principle of non-discrimination and the national treatment clause:
With the development of international investment, the principle of
non-discrimination in Sino-foreign BITs has been split into two
variants: The most-favored nation clause and the national treatment
clause. In other words, national treatment has become independence
from the principle of non-discrimination. This category is most
commonly used by BITs in the 21century. According to the present
author’s calculation, 14 of the 110 Sino-foreign BITs include both the
non-discrimination principle and the national treatment clause in their
texts.31
28
General Agreement on Tariffs and Trade, Oct. 30, 1947, 61 Stat. A3, T.I.A.S. No. 1700, 55
U.N.T.S. 187 [hereinafter GATT 1947].
29
Agreement on the Promotion and Protection of Investments, China–Uzb., Apr. 19, 2011, art. 3,
http://investmentpolicyhub.unctad.org/Download/TreatyFile/3357.
30
These 13 Sino-foreign BITs are as follows: Agreement Concerning the Encouragement and
Reciprocal Protection of Investments, China–Fr., Nov. 26, 2007, 2796 U.N.T.S.; Additional
Protocol to the Agreement Concerning the Reciprocal Encouragement and Protection of
Investments, China–Bulg., June 26, 2007; Agreement on the Promotion and Reciprocal Protection
of Investments, China–Russ., Nov. 9, 2006; Additional Protocol to the BIT, China–Slovk., Dec. 7,
2005; Agreement Concerning the Encouragement and Reciprocal Protection of Investment,
China–Japan., Aug. 27, 1988, 1555 U.N.T.S. 197; Agreement on the Promotion and Protection of
Investments, China–Uzb., Apr. 19, 2011; Agreement on the Reciprocal Promotion and Protection of
Investments, China–Saudi Arabia, Feb. 29, 1996; Agreement on the Promotion and Protection of
Investments, China–Myan., Dec. 12, 2001; Agreement for the Promotion and Protection of
Investments, China–India, Nov. 21, 2006; Agreement for the Mutual Promotion and Protection of
Investments, China–Madag., Nov. 21, 2005; Agreement on the Reciprocal Promotion and
Protection of Investments, China–Trin. & Tobago, July 22, 2002; Agreement Concerning the
Promotion and Reciprocal Protection of Investments, China–Tanz., Mar. 24, 2013; Agreement for
the Promotion and Reciprocal Protection of Investments, China–Can., Sept. 9, 2012.
31
These 14 Sino-foreign BITs are as follows: Agreement on the Encouragement and Reciprocal
Protection of Investments, China–Ger., Dec. 1, 2003, 2362 U.N.T.S. 253; Agreement on the
Reciprocal Promotion And Protection of Investments, China–Belg. & Lux. Econ. Union, June 6,
2005; Agreement on the Promotion and Reciprocal Protection of Investments, China–Fin., Nov. 15,
2004, 2400 U.N.T.S. 117; Agreement on Encouragement and Reciprocal Protection of Investments,
China–Neth., Nov. 26, 2001, 2369 U.N.T.S. 219; Agreement on the Promotion and Reciprocal
Protection of Investments, China–Switz., Jan. 27, 2009; Agreement on the Encouragement and
Reciprocal Protection of Investments, China–Port., Dec. 9, 2005; Agreement on the Promotion and
Reciprocal Protection of Investments, China–Spain, Nov. 14, 2005; Agreement on the Promotion
B. Factors Contributed to China’s Initial Approach
Before 2013, China’s attitude towards national treatment underwent a

shift from an initial stage of total rejection to a later stage of conditional
acceptance. This change was closely related to both international- and
domestic-investment development.
Kate Miles observes the emergence of international investment law
from an international legal system is for the sake of the interests of
capital-exporting countries, which is a result of global expansion of
European trade and investment activity from the seventeenth to early
twentieth centuries.32 West Germany and Pakistan signed the first BIT in
1959,33 and over the next 30 years, more than three hundred BITs had been
concluded. 34 As for China, its “reform and opening-up” policy was
implemented in 1979, and its first BIT was signed with Sweden in 1982. As
it moved from seclusion to a more open system, China attracted significant
inward foreign investment due to its large economic market and sufficient
labour force. Having realised the importance of foreign investment, China
started to sign more BITs with other states in the 1980s. However, as a new
and uncertain participant in global foreign investment, China tended to be
relatively conservative. At the beginning of its period of “reform and
opening-up”, China strongly emphasised its state economic sovereignty and
thus was cautious of the principle of non-discrimination. In addition, there
were few Chinese enterprises that were highly competitive internationally
in the 1980s. Therefore, national treatment was not incorporated into
China’s early BITs.
The late 1980s witnessed the accelerated liberalization of national
policies governing investment flows globally. In 1995 alone, 106 of 112
regulatory changes altering investment regimes in 64 countries suggested
either greater liberalization or the promotion of FDI.35 The liberalization of
and Protection of Investments, China–S. Kor., Sept. 7, 2007; Agreement Concerning the Reciprocal
Encouragement and Protection of Investments, China–S. Afr., Dec. 30, 1997, 2567 U.N.T.S. 295;
Agreement on the Promotion and Protection of Investments, China–Guy., Mar. 27, 2003;
Agreement on the Promotion and Protection of Investments, China–Malta, Feb. 22, 2009;
Agreement for the Reciprocal Promotion and Protection of Investments, China–Cyprus, Jan. 17,
2001; Agreement for the Mutual Promotion and Protection of Investments, China–Mali, Feb. 12,
2009; Agreement on the Promotion and Protection of Investments, China–Congo, Mar. 20, 2000,
2362 U.N.T.S. 253.
32
Kate Miles, International Investment Law: Origins, Imperialism and Conceptualizing the
Environment, 21(1) COLO. J. INT’L ENV’T. L. & POL’Y 1, 2 (2010).
33
Treaty for the Protection of Investment, Fed. Rep. Ger.–Pak., Nov. 25, 1959, 457 U.N.T.S. 23.
34
For a listing of 309 bilateral investment treaties concluded through December 31, 1988, see
Athena J. Pappas, References on Bilateral Investment Treaties, 4 ICSID REV.-FOREIGN INV. L.J.
189, 194-203 (1989).
35
UN CONFERENCE ON TRADE & DEV., WORLD INVESTMENT REPORT 1996: INVESTMENT, TRADE
AND INTERNATIONAL POLICY ARRANGEMENTS, at xxvi, U.N. Sales No. E.96.II.A (1996).
448 AJWH [VOL. 11: 437
FDI regimes typically coincided with the conclusion of BITs.36 At the same
time, as a further implementation of its “reform and opening-up” initiative,
China adopted a series of opening-up policies so as to promote and
encourage foreign investment. More specifically, five special economic
zones were established.37 From a legislative perspective, The Sino-Foreign
Equity Joint Venture Law of the People’s Republic of China was
promulgated in 1979, The Wholly-Foreign-Funded Enterprise Law of the
People’s Republic of China in 1986, and The Sino-Foreign Contractual
Joint Venture Law in 1988. According to the World Development Report
1999/2000 which was published by the World Bank, China’s annual Gross
Domestic Product growth (hereinafter “GDP growth”) was 10.2% from
1980-1990 and was 11.1% from 1990-1998, while the world’s average
annual GDP growth was only 3.2% and 2.4% during those periods
respectively. 38 Along with this economic growth, China’s FDI inflow
increased rapidly, making China the largest FDI recipient among the
developing states in 1992.39 China’s actual FDI flows continued rising,
reaching US$37.5 billion in 1995.40 In 1996, the United Nations noted that
China was moving towards national treatment in accordance with the
country’s 1994 tax reform, potentially preparing China for entry into the
World Trade Organization (hereinafter “WTO”). 41 In 1998, China
implemented its “going abroad” strategy; it formally established the
strategy as a separated national economic policy in 2001, when it
transformed from a major capital-importing country to a major
capital-exporting country. When some preferential-treatment policies for
foreign investors and investments were issued from 1990s to 2000, fierce
debate regarding China’s preferential national treatment FDI policies.42
With the rapid increase in the number of Chinese enterprises going abroad
to make investments, China gradually realised the importance of BITs in
protecting its foreign investors as well as its foreign investments. In this
regard, China’s approach as reflected in its BITs became increasingly
liberal. For instance, China started to embrace post-establishment national
treatment with restrictions such as non-conforming measures, some of
which were indicated in China’s Catalogue for the Guidance of Foreign
Investment Industries.
As mentioned in Part 2(1), many modern Sino-foreign BITs feature the
36
Id. at 96.
37
The five special administrative zones are Shenzhen, Zhuhai, Shantou, Xiamen and Hainan.
38
World Bank, Entering the 21st Century: World Development Report 1999/2000 250-51 (1999).
39
HAN CAIZHEN, ZHONGGUO WAIZI ZHENGCE HE FALU DE JIXIAO FENXI [CHINESE FOREIGN
INVESTMENT POLICY AND LAW: EVALUATION OF EFFECTIVENESS] 21-22 (2007).
40
UN CONFERENCE ON TRADE & DEV., Supra note 35, at 56.
41
Id. 35, at 54.
42
Wei Wang, Super-national Treatment: A Misconception or a Creation with Chinese
Characteristics?, 5(3) FRONTIERS L. CHINA 376, 380-82 (2010).
independent principle of non-discrimination as well as the national

treatment clause. One of the reasons for this may be the impact of
traditional European BITs on Chinese BITs. This impact can be n the BIT
clauses’ many similarities, such as their definitions of “investment”, 43
“investor”, 44 and the “fair market value ” compensation criteria in
expropriation, as well as post-establishment national treatment.4546 Apart
from this external influence, another reason that Chinese BITs incorporate
post-establishment national treatment may be changes in the international
investment atmosphere. Admittedly, shifts in a country’s foreign
investments influence its investment strategies. The United Kingdom,
France, and Germany, all of which were largely capital-exporting countries
before the Second World War, did not regulate over foreign investment.
However, in face of rising of American investment, the three countries
turned to a number of formal and informal mechanisms to secure their
national interests.47 One of the formal mechanisms they used was the
regulation of foreign investment in sensitive sectors like cultural industries.
From 1990-2000, China’s rapid increase in inward investment necessitated
a balance between regulatory measures and investment profits. On the one
hand, governments reserve the right to regulate so as to protect its nationals.
On the other hand, treating investors fairly and attracting more investments
are among governments’ main concerns. Under such a scenario, it is an
inevitable tendency for China to gradually accord post-establishment
national treatment to foreign investors in nearly all Sino-foreign BITs
signed in the twenty-first century.48 In recent years, European BITs and
free trade agreements seem to have become heavily influenced by the North
American Free Trade Agreement (hereinafter “NAFTA”). For example, in
the newly released E.U.–Thailand FTA-investment chapter (draft 2013), the
43
See, e.g., Agreement on Promotion and Protection of Investments, Bahr.–Neth., art. 1(a), Feb. 5,
2007, 2649 U.N.T.S. 13. See also Agreement on the Encouragement and Reciprocal Protection of
Investments, China–Ger., art.1(1), Dec. 1, 2003, 2362 U.N.T.S. 253.
44
See, e.g., Agreement concerning the Encouragement and Reciprocal Protection of Investments,
Ger.–Jordan, art.1(3), Nov. 13, 2007, 2771 U.N.T.S. 157. See also, Agreement on the
Encouragement and Reciprocal Protection of Investments, China–Ger., art. 1(2), Dec. 1, 2003,
2362 U.N.T.S. 253.
45
See, e.g., Agreement on the Promotion and Protection of Investments, S. Kor.–Neth., art. 5(2),
July 12, 2003, http://investmentpolicyhub.unctad.org/Download/TreatyFile/3256. See also
Agreement on the Promotion and Protection of Investments, China–Malta, art. 4(2), Feb. 22, 2009,
46
See, e.g., Agreement on Encouragement and Reciprocal Protection of Investments, Eth.–Neth.,
art. 3(2), May 16, 2003, 2594 U.N.T.S. 175. See also Additional Protocol to the Agreement
Concerning the Reciprocal Encouragement and Protection of Investments, Bulg.–China, art. 1,
June 26, 2007, http://tfs.mofcom.gov.cn/aarticle/Nocategory/201002/20100206774607.html%3C
br/%3E.
47
Ha-Joon Chang, Regulation of Foreign Investment in Historical Perspective, 16(3) EUR. J. DEV.
RES. 687, 696 (2003).
48
Except the 2000 China–Iran BIT and 2007 China–Cuba BIT.
450 AJWH [VOL. 11: 437
definition of “investment” is defined in addition to some exceptions,49 as

in NAFTA.50 In addition, Section 3, Article X.6, of the Comprehensive
Economic and Trade Agreement (hereinafter “CETA”) between the
European Union and Canada, which is regarded as a heralding
transformation in European foreign-investment doctrines, enlarges the
scope of national treatment to the pre-establishment level51 just as in the
NAFTA text. 52 From post-establishment national treatment to
pre-establishment national treatment, NAFTA has not only played a critical
role in the development of European investment doctrines, but it has also
had substantial influence on China’s foreign investment policies.
IV. POST-2013: SHIFTING TOWARD A PRE-ESTABLISHMENT

NATIONAL TREATMENT WITH A NEGATIVE LIST
A. China–U.S. BIT Negotiations
As a state that has made a large number of FCN treaties and is known
as the forerunner of the modern BITs, 53 the United States has a
longstanding tradition of bilateral commercial treaties. After World War II,
the United States concluded a network of bilateral FCN treaties.54 In 1981,
the United States launched its first specific BIT negotiation with developing
countries,55 concluding eight BITs as of January 1, 1990.56 Yet even with
the establishment of The Encouraging Investment Agreement and
Exchange of Note on Investment Insurance and Guarantee Between the
49
E.U.–Thailand Free Trade Agreement (draft 2013), ch. 2, § 1, http://www.bilaterals.org/?e
u-thailand-fta-investment- chapter&lang=en (last visited Mar. 22, 2016).
50
North American Free Trade Agreement art. 1139, Can.–Mex.–U.S., Dec. 17, 1992, 32 I.L.M.
289 (1993) [hereinafter NAFTA].
51
Comprehensive Economic and Trade Agreement, Can.–E.U., art. 8.7.1, published on Sept. 26,
2014 [hereinafter CETA] provides that:
Each Party shall accord to investors of the other Party and to covered investments,
treatment no less favourable than the treatment it accords, in like situations to its own
investors and to their investments with respect to the establishment, acquisition,
expansion, conduct, operation, management, maintenance, use, enjoyment and sale or
disposal of their investments in its territory.
52
NAFTA, supra note 50, art. 1102.
53
MUTHUCUMARASWAMY SORNARAJAH, THE INTERNATIONAL LAW ON FOREIGN INVESTMENT 209
(2d ed. 2004).
54
For a listing of FCN treaties in force prepared by the United States Department of State, see
American Society of International Law, Recent Actions Regarding Treaties to Which the United
States Is a Party, 20(2) INT’L LEGAL MATERIALS 557, 565 (1981).
55
See William E. Coughlin, The U.S. Bilateral Investment Treaty: An Answer to Performance
Requirements?, in REGULATING THE MULTINATIONAL ENTERPRISE: NATIONAL AND
INTERNATIONAL CHALLENGES 129, 136-37 (B. Fisher & J. Turner eds., 1983).
56
The eight countries are Senegal, Zaire, Morocco, Turkey, Cameroon, Bangladesh, Egypt, and
Grenada.
People’s Republic of China and the United States of America in October

1980, the United States and China struggled from 1982-1987 to agree on a
BIT. Although they held six rounds of negotiations, the two countries failed
to reach consensus due to disagreements on nearly all critical issues,
including those of national treatment, expropriation and compensation, and
transfer and dispute settlement, among others.57 Seeking to “achieve an
agreement of mutual benefit that facilitates and protects investment and
enhances transparency and predictability for investors of both countries,”58
the United States and China launched a new round of BIT negotiations at
the conclusion of the fourth China–United States Strategic Economic
Dialogue on June 18, 2008. The negotiations were also colloquially
regarded as the “century negotiations”, or the “second WTO accession
negotiations”. At the beginning of the bilateral negotiations, the United
States and China adopted divergent positions, especially in their approaches
to pre-establishment national treatment, labour and environmental standard.
In April 2012, the United States released its 2012 Model BIT, known as the
template for the United States in the China–United States BIT negotiations.
After more difficult bargaining, in July 2013, during the fifth round of the
China–United States Strategic and Economic Dialogue, the two parties
declared agreement on embarking on substantial negotiations of the
China–United States BIT based on market access (“pre-establishment”
national treatment) with a “negative list” approach, 59 representing a
significant breakthrough in China–United States BIT negotiations.
B. Reasons for the Post-2013 Shifts
In terms of their different legal systems, FDI traditions, and roles in the
international capital market, the United States used to pay more attention to
foreign investors and investments, while China was more concerned with
host-country interests. However, as China has evolved from being a
participant to a leader in the world economy and as the number of
Sino-foreign BITs has gradually increased, 60 China has become more
57
See ZENG HUAQUN, GUOJI TOUZI FA [INTERNATIONAL INVESTMENT LAW] 410-11 (1999);
ZHANG REN, MEIGUO ZAIHUA DE ZHIJIE TOUZI [U.S. DIRECT INVESTMENT IN CHINA 1980-1991],
at 52-53(1993); Zhang Yaohui, Zhong Mei Shuangbian Touzi Falu Xieding Dui Meiguo Dui Hua
Touzi De Yingxiang Yu Zuoyong [Effect and Influence of Sino-U.S. Bilateral Investment Agreement
Towards U.S. Investment in China], 27(4) J. SHANGHAI TCHR. U. (SOC. SCI.) 52, 53 (1998).
58
THE FIFTH U.S.–CHINA STRATEGIC ECONOMIC DIALOGUE JOINT U.S.–CHINA FACT SHEET,
http://beijing.usembassy-china.org.cn/120508sed1.html (last visited Mar. 22, 2016).
59
Joint U.S.–China Economic Track Fact Sheet of the Fifth Meeting of the U.S.–China Strategic
and Economic Dialogue, U.S. DEPARTMENT OF TREASURY, http://www.treasury.gov/press-cen
ter/press-releases/Pa ges/jl2010.aspx (last visited Mar. 22, 2016).
60
See generally Wang Guiguo, China’s Practice in International Investment Law: From
Participation to Leadership in the World Economy, 34 YALE J. INT’L L. 575 (2009).
452 AJWH [VOL. 11: 437
Americanised in its approach to BITs.61 This may be because China is

currently the largest FDI host and home country. As a host country, China
has to maintain its national interests and legitimate public welfares.62 On
the other hand, as a home country, China needs to establish favourable
policies to promote outward FDI, as well as to protect its foreign investors
and investments. Since both China and the United States are important FDI
host and home countries, the interests of China are likely to accord with
those of the United States in some sense. The overlapping of FDI interests
may contribute to the two countries’ agreement on the pre-establishment
national treatment with a negative list approach. With respect to the
ongoing China–United States BIT negotiations, the outlook is optimistic
but much effort will be required to balance the interests of a given country
in its capacity as a (capital-importing) host country with its interests in its
capacity of a (capital-exporting) home country.
V. THE IMPLICATIONS OF THE “NEW NORMAL”: HOME AND ABROAD
The pre-establishment national treatment with a negative list approach

indicates the liberalization of China’s FDI regime and is having profound
implications both domestically and internationally.
A. Domestic Implications
The pre-establishment national treatment with a negative list approach

represents China’s efforts to rationalise its foreign investment regulatory
regime. In 2013, the Decision on Major Issues Concerning
Comprehensively Deepening Reform (hereinafter “The Decision”), adopted
at the Third Plenary Session of the 18th Communist Party of China Central
Committee, stipulated that “we will have the same laws and regulations on
Chinese and foreign investment, and keep foreign investment policies
stable, transparent and predictable,” while “exploring a management model
for foreign investors with pre-establishment national treatment plus a
negative list.”63 The State Council of China approved The (Shanghai) Pilot
61
Cai Congyan, China–US BIT Negotiations and the Future of Investment Treaty Regime, 12(2) J.
INT’L ECON. L. 457, 459 (2009).
62
For example, Article 84 of the Legislation Law of the People’s Republic of China stipulates:
“Laws, administrative regulations, local regulations, autonomous regulations, separate regulations
and rules shall not be retroactive, but the regulations formulated specially for the purpose of better
protecting the rights and interests of citizens, legal persons and other organizations are excepted.”
Lifa Fa [Law of Legislation] (promulgated by the Standing Comm. Nat’l People’s Cong., Mar. 15,
2000, effective July 1, 2000) 2000 STANDING COMM. NAT’L PEOPLE’S CONG. GAZ. 112,
http://www.gov.cn/english/laws/2005-08/20/content_29724.htm (China).
63
Yu Bai, Decision of the CCCPC on Some Major Issues Concerning Comprehensively Deepening
the Reform, Xinhua (Nov. 15, 2013, 6:53 PM), http://news.xinhuanet.com/politics/2013-11/15
/c_118164235.htm; see also a brief about the decision in English, http://www.china.org.cn/chin
Free Trade Zone on August 22, 2013. Guangdong, Tianjin and Fujian Pilot
Free Trade Zones were subsequently approved on March 24, 2015. As a test
to identify changes in the domestic legal regime that would accommodate a
high-standard BIT, the Shanghai government issued Special Administrative
Measures (Negative List) for Foreign Investment Access into the Shanghai
Pilot Free Trade Zone in September 2013.64 The State Council released a
new edition of the negative list in 2015.65 The State Council subsequently
released its first opinion on the implementation of the negative-list system
governing market access in late 2015. 66 Recently, the National
Development and Reform Commission and Ministry of Commerce released
The Draft Negative List for Market Access (Trial Version) on 2 March
2016.67 The Draft will be implemented in Tianjin, Shanghai, Fujian and
Guangdong for trial. The free trade zones (hereinafter “FTZs”) and their
reform initiatives have resulted in the accelerated implementation of The
Decision by encouraging innovative measures in investment management,
trade regulation, financial innovation and overall supervision, which
together reflects the reform and development in investment and trade fields
resulted from China’s opening-up. The pre-establishment national treatment
with a negative list approach has profound implications in China’s domestic
investment system reform.
1. Foreign Investment Legislation Reform — In accordance with the
principles set out in The Decision, China’s Foreign Investment Law
(Exposure Draft) was released on January 19, 2015, accompanied by an
explanatory note.68 If it is ultimately passed, the law will replace China’s
three current primary foreign-investment laws, as identified in Part 2(2),
ese/2014-01/17/content_31226494.htm.
64
For an unofficial translation of the negative list, see Negative List for Shanghai Free Trade Zone,
AMERICAN CHAMBER OF COMMERCE IN SHANGHAI (2013), http://amcham-shanghai.org/NR/rd
onlyres/88D66CDB-B8C8-42C8-BBA0-69E18E02EC72/20131/UnofficialTranslationNegativeList
October2013.pdf.
65
Ziyou Maoyi Shiyan Qu Waishang Touzi Zhunru Tebie Guanli Cuoshi (Fumian Qingdan)
[Special Management Measures (Negative List) for Foreign Investment Access in Pilot Free Trade
Zones] (promulgated by the St. Council, Apr. 20, 2015, effective May 20, 2015) ST. COUNCIL GAZ.,
May 10, 2015, at 40, http://www.gov.cn/zhengce/content/2015-04/20/ content_9627.htm (China).
66
Guowuyuan Guanyu Shihang Shichang Zhunru Fumian Qingdan Zhidu De Yijian [Opinions of
the State Council on the Implementation of the Market Access Negative List System] (promulgated
by the St. Council, Oct. 2, 2015, effective Oct. 2, 2015) ST. COUNCIL GAZ., Oct. 30, 2015, at 10,
http://www.gov.cn/zhengce/content/2015-10/19/content_10247.htm (China).
67
The draft contains a total of 328 items, including 96 in the prohibited access category and 232 in
the restricted access category. See Shichang Zhunru Fumian Qingdan Caoan (Shidian Ban) [Draft
Negative List for Market Access (Trial Version)] (promulgated by the St. Development & Reform
Commission and Ministry of Commerce, Mar. 2, 2016, effective Mar. 2, 2016), CLI. 4.268243(EN)
(Lawinfochina).
68
Zhonghua Renmin Gongheguo Waiguo Touzi Fa (Caoan Zhengqiu Yijianga) [Foreign Investment
Law of the People’s Republic of China (Draft for Comments)] (promulgated by the Ministry of
Commerce, Jan. 19, 2015), http://tfs.mofcom.gov.cn/article/as/201501/20150100871010.shtml
(China). Foreign Investment Law of the People’s Republic of China (Draft for Comments).
454 AJWH [VOL. 11: 437
thereby unifying and reconstructing China’s foreign-investment law regime

and changing the extant dual-track investment practices. For instance, laws
and regulations regarding incorporation, corporate governance, and
liquidation may be modified. The published draft indicates that new foreign
companies to China should generally receive pre-establishment national
treatment, while the existing case-by-case approval system should be
replaced by negative-list management. With respect to the industries
excluded from the negative list, specific implementing legislations from the
ministerial agency are required to be responsible for supervision.69 Though
a number of ministerial agencies have issued circulars or opinions to
support the application of national treatment with a negative list
approach, 70 these circulars are more general guidelines than detailed
implementations.71 The ambiguities and legal uncertainties may indicate
the difficulties in achieving an agreement by reconciling the conflicting
interests among different regulatory agencies in the process of streamlining
foreign investment administration.
The pressure does not only come from the coordination among
different ministry agencies, but also from competitions among provincial
governments. Chinese local governments have been competing with one
another to attract FDI by preferential treatment, for instance, reducing taxes
and land use fees.72 Considering the vast discrepancies of development
status, it is painstaking to reach an agreement on a high level of investment
liberalisation among different provinces in China. For example, disputes
arise from the level according to which domestic investment should be
compared with foreign investment in judging whether foreign investment
was accorded “less favorable treatment”. International investment arbitral
tribunals held both in Pope & Talbot and Feldman v. Mexico that NAFTA
Article 1102 (2) explicitly reaffirmed that the foreign investor should
receive no less favorable treatment than any domestic investor who is in
like circumstance. 73 Accordingly, a foreign investor in least-developed
areas in China, such as Ningxia Autonomous Region, should be treated no
less favourably than any foreign investor in China, such as Beijing. Is it
realisable? The answer may be affirmative in the long run but doubtful at
69
Zhongmei Wang, Negative List in the SHPFTZ and Its Implications for China’s Future FDI
Legal System, 50(1) J. WORLD TRADE 117, 129 (2016).
70
See, e.g., Xinghua Zhang, People’s Bank of China Releases Opinions on Leveraging the Role of
Finance to Support the Development of the China (Tianjin) Pilot Free Trade Zone, PEOPLE’S BANK
OF CHINA (Dec. 11, 2015), http://www.gov.cn/xinwen/2015-12/11/content_5022936.htm.
71
China’s Economic Reforms: Current Policy Trends and Debate 7–11, at 4, COVINGTON &
BURLING LLP (2014), http://trade.ec.europa.eu/doclib/docs/2014/august/tradoc_152738.08.10.pdf.
72
See Keith Head & John Ries, Inter-city Competition for Foreign Investment: Static and Dynamic
Effects of China’s Incentive Areas, 40(1) J. URB. ECON. 38, 39 (1996).
73
Pope & Talbot, Inc. v. Government of Canada, 41 I.L.M. 1347, Award on the merit of phase 2, ¶
73 (NAFTA Arb. Trib. Apr. 10, 2001); see also Feldman v. Mexico, ICSID Case No.
ARB(AF)/99/1, Award, ¶¶ 165-66 (Dec. 16, 2002), 18 ICSID-Rev.-FILJ 488 (2003).
the moment. More specifically, can the investment climate in some western
provinces support the preferential treatment in commitment to foreign
investors?74 If not, a high level of liberalisation is likely to bring about
more unbalanced regional development. That explains the reluctance to the
liberalisation doctrine from some least-developed areas. Further, the
co-existence of multi-version of negative lists in Shanghai and four new
FTZs can be a reflect of the problem of policy rent-seeking in China.75 In
order to gain support from most local governments, an investment
adjustment assistance mechanism is necessary to appropriately compensate
the cost of least-developed localities in the process of a further opening-up.
The three year suspension of the three current primary foreign-investment
laws in FTZs is going to expire,76 the application of the pre-establishment
national treatment with a negative list approach to nationwide is likely to
delay due to various pressure. In this regard, on the way to a nationwide
“new normal” of pre-establishment national treatment with a negative list
approach, the domestic investment legislation reform still has a long way to
go.
2. The Transformation of Government Functions — According to
current rules, certain licensing processes are always required before
establishing or expanding the operations of companies. 77 As a result,
continued opening-up is in line with the streamlining of administrative
work and the delegation of power to lower levels so as to ensure the
decisive role of the market in resources allocation. The goal of reducing the
number of items that require government review by one-third was achieved
in 2014. 78 No department may create approval items outside of the
administrative-approval list, and the market is allowed to operate in any
way that is not specifically prohibited by law. Transparency has also been
highlighted in the process of streamlining administrative approvals. A
government power list system has been introduced at all levels of local
governments in order to ensure accountability and transparency in the
modernization of the state governance system, as well as to prevent
governments from exerting excessive power in order to shirk their
74
It is widely-acknowledged that the coastal provinces have preferential resource allocations than
the interior regions in China. See also John M. Litwack & Yingyi Qian, Balanced or Unbalanced
Development: Special Economic Zones as Catalyst for Transition, 26(1) J. COMP. ECON. 117, 118
(1998); Dennis Tao Yang, What Has Caused Regional Inequality in China?, 13 CHINA ECON. REV.
331, 333 (2002).
75
Wang, supra note 69, at 140.
76
The Decision Authorizing the State Council to Temporarily Adjust Administrative Approvals
Under Relevant Laws Within the China (Shanghai) Pilot Free Trade Zone, released by the Standing
Committee of the National People’s Congress on 30 August 2013, decides that all of the articles
that require the mandatory procedure for pre-approval are suspended in the Zone for three years.
77
Zhen Zhao & Shuyang Ou, The Thinking of “Negative List” Management Mode Implemented by
Administration Approval System, 10(4) CAN. SOC. SCI. 120, 123-24 (2014).
78
Premier Li Keqiang’s Report on the Work of the Government, http://www.china.org.cn/chine
se/2015-03/17/content_35077119.htm (last visited Mar. 17, 2016).
456 AJWH [VOL. 11: 437
responsibilities. According to the power list, governmental departments are

only allowed to do what is mandated by the law. Taken a step further, the
Decision Regarding the Cancellation of Non-Administrative Approval
Items was publicised in May 2015, abolishing 49 non-administrative
approval items.
3. The Establishment of an Oversight System — A strong oversight
system for delegated matters when they are being handled and after they
have been handled is being formed. While the government’s focus has been
on shifting from administrative approval to supervision and checks, its
ability to regulate the market still needs to be strengthened. Given such
circumstances, a series of initiatives has been implemented. For instance, a
fleshing out of China’s current national security review regime has been
indicated in both Chapter 4 of China’s Foreign Investment Law (Exposure
Draft)79 and the Measures for the National Security Review of Foreign
Investment Pilot Free Trade Zones, issued in April 2015.80 Under the
national security review mechanism, foreign investment applications
considered threatening or detrimental to China’s national security must be
rejected by the joint ministerial mechanism set up by the State Council.
Performing a national security review aligns China with international
norms and boosts its corporate governance efforts.
Another measure that has been taken to enhance market supervision is
to strengthen the enforcement of the Antimonopoly Law. Taking effect in
August 2008, the Antimonopoly Law of the People’s Republic of China has
attracted significant attention in recent years. The Anti-monopoly Law is
similar in spirit to the national treatment clause, as both aim to promote fair
competition. The Law targets companies that abuse their status on the
market and take advantage of administrative powers that restrict
competition. 81 Over the past six years, the enforcement of the
Anti-Monopoly Law has led to positive results. First, a series of
administrative rules and regulations, the guidelines for the Antimonopoly
Committee, departmental regulations, and regulatory documents have all
been issued. Second, some landmark cases, such as the Qualcomm case,82
79
Zhonghua Renmin Gongheguo Waiguo Touzi Fa (Caoan Zhengqiu Yijianga) [Foreign Investment
Law of the People’s Republic of China (Draft for Comments)], supra note 68, ch. 4.
80
Ziyou Maoyi Shiyan Qu Waishang Touzi Guojia Anquan Shencha Shihang Banfa [Measures for
the National Security Review of Foreign Investment Pilot Free Trade Zones] (promulgated by St.
Council, Apr. 8, 2015, effective May 8, 2015) ST. COUNCIL GAZ., May 10, 2015, at 48,
http://www.gov.cn/zhengce/content/2015-04/20/content_9629.htm (China).
81
Zhonghua Renmin Gongheguo Fan Longduan Fa [Anti-Monopoly Law of the People’s Republic
of China] (promulgated by Standing Comm. Nat’l People’s Cong., Aug. 30, 2007, effective Aug. 1,
2008), arts. 3, 8, CLI.1.96789(EN) (Lawinofchina).
82
Guojia Fazhan He Gaige Weiyuanhui dui Gaotong Gongsi Xingzheng Chufa Juedingshu [NDRC
v. Qualcomm Inc., National Development and Reform Commission’s Decision on Administrative
Sanction Against Qualcomm Incorporated], 2015 NDRC 1 (Feb. 9, 2015), http://jjs.ndrc.g
ov.cn/fjgld/201503/t20150302_666170.html (China).
the auto parts enterprises price monopoly agreement case, 83 and the
Huawei v IDC case, 84 among others, have caught the attention of
enterprises, law practitioners, and scholars. China currently has
Memorandums of Cooperation with the United States, 85 the European
Union, 86 and some other countries 87 in order to enhance cooperation
in preventing monopolies. Given the urgency of establishing a strong
oversight system for delegated matters, it is foreseeable that the
enforcement mechanism of the Anti-Monopoly Law will be strengthened
and its related legislation improved in the near future.
In addition, China has sought to establish a nationwide social credit
system so as to better implement supervisory measures. The Planning
Outline for the Construction of a Social Credit System (2014-2020) was
released in June, 2014 by the State Council (hereinafter “The Outline”).88
The Outline, which highlights the government’s resolve to build a more
trustworthy social environment, primarily focuses on credit in four major
areas, including administrative affairs, commercial activities, social
behavior, and the judicial system. The Outline also indicates that a series of
laws and regulations regarding social credit, a credit reference system that
covers the whole of society, and a reward and punishment mechanism will
83
Guojia Fazhan He Gaige Weiyuanhui dui Aisan Gongye Zhushihuishe Xingzheng Chufa
Juedingshu [NDRC v. Aisan Industry Co., Ltd, National Development and Reform Commission’s
Decision on Administrative Sanction Against Aisan Industry Co., Ltd] 2014 NDRC 4 (Aug. 15,
2014), http://jjs.ndrc.gov.cn/fjgld/201409/t20140918_626065.html (China).
84
Huawei Gongsi Su IDC [Huawei Technology Co., Ltd. v. Inter Digital Corp.],
CLI.C.2449578(EN) (GUANGDONG HIGHER PEOPLE’S CT. Oct. 28, 2013) (China).
85
Memorandum of Understanding on Antitrust and Antimonopoly Cooperation Between the
United States Department of Justice and Federal Trade Commission and The People’s Republic of
China National Development and Reform Commission, Ministry of Commerce, and State
Administration for Industry and Commerce, U.S.–China, July 27, 2011, https://www.ftc.gov/sys
tem/files/110726mou-english.pdf.
86
Memorandum of Understanding on Cooperation in the Area of Anti-Monopoly Law Between the
European Union and the National Development and Reform Commission and the State
Administration for Industry and Commerce of the People’s Republic of China, E.U.–China, Sept.
20, 2012, http://ec.europa.eu/competition/international/bilateral/mou_china_en.pdf.
87
Such as Australia and Korea. See Memorandum of Understanding in Anti-Monopoly
Cooperation Between the Australian Competition & Consumer Commission and the Ministry of
Commerce of the People’s Republic of China, Austl.–China, May 20, 2014, http://www.accc.go
v.au/system/files/Memorandum%20of%20understanding%20in%20anti-monopoly%20cooperation
%20between%20the%20Australian%20Competition%20%26%20Consumer%20Commission%20a
nd%20the%20Ministry%20of%20Commerce%20of%20the%20People%E2%80%99s%20Republi
c%20of%20China%20-%20English%20version.pdf; see also Memorandum of Understanding on
Competition Cooperation Between the Fair Trade Commission of The Republic of Korea and The
State Administration for Industry and Commerce of the People’s Republic of China, S. Kor.–China,
May 30, 2012, http://eng.ftc.go.kr/bbs.do?command=getList&type_cd=72 &pageId=0501.
88
Shehui Xinyong Tixi Jianshe Guihua Gangyao 2014-2020 [Planning Outline for the
Construction of a Social Credit System (2014-2020)] (promulgated by the St. Council, June 14,
2014, effective June 27, 2014), ST. COUNCIL GAZ., July 10, 2014, at 11, https://china
copyrightandmedia.wordpress.com/2014/06/14/planning-outline-for-the-construction-of-a-social-cr
edit-system-2014-2020/ (China).
458 AJWH [VOL. 11: 437
be established by 2020. The credit record system will include various types
of information, including industrial, financial and commercial registrations;
traffic violations; judicial decisions; and tax and social security payments.
Drawing on the State’s Outline, many provincial and municipal
governments have been drafting their own guidelines. Meanwhile, some
crucial measures have been taken to implement The Outline. For instance,
in the beginning of 2015, the People’s Bank of China allowed eight private
firms to set up personal credit information businesses.89 In line with The
Decision, a nationwide social credit system will help to promote equality
and improve market oversight. Generally speaking, many domestic
programs will be launched to enhance supervision and promote greater
market access.
B. External Implications
It is expected that pre-establishment national treatment and the

negative-list approach will become China’s “new normal”. This represents
a fundamental change to China’s approach to investment agreements. The
adoption of pre-establishment national treatment with a negative list
accords foreign investors and foreign investments expansive rights and
protections. Yet this approach also suggests both increased opportunities
and challenges in Sino-foreign diplomatic and commercial relations.
On one hand, the approach of pre-establishment national treatment
with a negative list is likely to promote Sino-foreign BIT negotiations and
foster China’s regional free trade negotiations, especially with developed
countries that are China’s biggest trade and investment partners. L. Poulsen,
J. Bonnitcha and J. Yackee proposed an analytical framework for assessing
costs and benefits of investment protection treaties. 90 By applying the
framework, a state can make an assessment of economic costs and benefits
as well as political costs and benefits associated with the investment treaty.
And one of the political costs is the extent of political resources required by
the negotiation of the investment treaty.91 It can be inferred that a state is
motivated to embark an IIA negotiation through which it can acquire most
benefits at lowest costs. Accordingly, states that take pre-establishment
national treatment with a negative list approach can lower their political
89
Xiaochun Ma & Chun Yao, China Central Bank Allows Private Firms to Provide Credit
Information Services, PEOPLE’S DAILY (Jan. 7, 2015, 11:13 AM), http://en.people.cn/busine
ss/n/2015/0107/c90778-8832706.html.
90
This framework is intended to help make policy choices when assessing the implications of a
particular investment treaty. See Lauge N. Skovgaard Poulsen et al., Analytical Framework for
Assessing Costs and Benefits of Investment Protection Treaties, LSE ENTERPRISE (2013),
http://www.italaw.com/sites/default/files/archive/Analytical-framework-for-assessment-costs-and-
benefits-of-investment-protection.pdf.
91
Id. at 26.
costs in IIA negotiations.

Currently, China is in process of BIT negotiations with the United
States and the European Union, and is engaged in several FTA negotiations
(including preparations) with Japan and Korea, Sri Lanka, Pakistan,
Maldives, Georgia, Norway, Association of Southeast Asian Nations
(hereinafter “ASEAN”) and Gulf Cooperation Council. Among these
countries, the United States began to require the pre-establishment national
treatment in its investment treaties since the mid-1980.92 Japan accepts the
pre-establishment approach in the Trans-Pacific Partnership Agreement93
and the 2015 Japan–Ukraine BIT.94 After the China–South Korea FTA was
signed on June 1, 2015,95 China and South Korea announced to “hold a
second round of negotiations on service trade and investment, with a mode
of national treatment prior to admission as well as the negative list.”96
Georgia accepts the pre-establishment approach in 2006 Georgia–Finland
BIT97 and 2009 Geogia–Kuwait BIT98. With respect to regional groups,
pre-establishment national treatment approach can be found in
ASEAN–Korea Investment Agreement, 99 ASEAN–India Investment
Agreement,100 and the recently adopted CETA.101 Due to an agreement on
the pre-establishment national treatment approach, the IIA negotiations
between China on one side, and the United States, the European Union,
Japan and Korea, Georgia or ASEAN on the other side can be promoted at
92
1983 U.S. BIT Negotiating Text (draft), art. 2(1); see also KENNETH J. VANDEVELDE, UNITED
STATES INVESTMENT TREATIES: POLICY AND PRACTICE 76 (1991).
93
Trans-Pacific Partnership Agreement, ch. 9, art. 9.4(1), Feb. 4, 2016.
94
Agreement between Japan and Ukraine for the Promotion and Protection of Investment,
Japan–Ukr., art. 4(1), Feb. 5, 2015, http://investmentpolicyhub.unctad.org/Download/TreatyFil
e/3324.
95
After receiving approval from both countries’ parliaments, South Korea will gradually remove
tariffs on 92 percent of all products imported from China over 20 years, while China will abolish
tariffs on 91 percent of all South Korean goods. As China’s most expansive bilateral free-trade
agreement, the China–South Korea FTA is expected to promote economic growth for both China
and South Korea.
96
Shaohui Tian, China–South Korea FTA Expected to Boost Chinese GDP, XINHUA, (June 2, 2015,
9:16 PM), http://news.xinhuanet.com/english/video/2015-06/02/c_134291765.htm.
97
Agreement Between the Government of the Republic of Finland and the Government of Georgia
on the Promotion and Protection of Investments, Geor.–Fin., art. 3(1), Nov. 24, 2006,
http://investmentpolicyhub.unctad.org/Download/ TreatyFile/1182.
98
Agreement Between the Government Of Georgia and The Government of The State Of Kuwait
For The Promotion and Reciprocal Protection Of Investments, Geor.–Kuwait, art. 3(1), Oct. 13,
2009, http://investmentpolicyhub.unctad.org/ Download/TreatyFile/1321.
99
Agreement on Investment under the Framework Agreement On Comprehensive Economic
Cooperation among The Governments of the Member Countries of the Association of Southeast
Asian Nations (ASEAN) and The Republic of Korea, art. 3, June 2, 2009, http://invest
mentpolicyhub.unctad.org/Download/TreatyFile/3339.
100
Agreement on Investment under The Framework Agreement on Comprehensive Economic
Cooperation Between The Association of Southeast Asian Nations(ASEAN) and The Republic of
India, ASEAN–India, art. 3(1), Nov. 12, 2014, http://investmentpolicyhub.unctad.org/Downloa
d/TreatyFile/3337.
101
CETA, supra note 51, art. 8.6.
460 AJWH [VOL. 11: 437
relative low political costs.

This inference accords with the recent progress of Sino-foreign IIA
negotiations. Representing substantial progress in China–E.U. BIT
negotiations, China and the E.U. decided to initiate serious negotiations of
the China–E.U. BIT on the basis of pre-establishment national treatment
with a negative list in May 2015.102 In addition, during the negotiations
regarding improving the China–ASEAN Free-Trade Area, Chinese Premier
Li Keqiang said: “China is willing to take part in the CAFTA negotiations
on the basis of the pre-establishment of national treatment plus the negative
list model.”103 Now that contracting states have reached an agreement on a
more liberal investment regime, some further concerns are going to be
raised. For example, whether and to what extent can China remove the
approval procedures for operating licenses and permits for the entry of
specific industries,104 rending a “real” liberalisation approach? Whether
and to what extent each sector and industry is internationally competitive
and should be opened up to international investors? 105 How does one
balance a state’s right to regulate with investor protection in a negative list?
Given China’s embracement of the pre-establishment national treatment
with a negative list approach, the agreement can trigger parties more
quickly “fall in love” to embark a Sino-foreign IIA negotiation. However,
whether a “marriage”, namely substantial cooperation can be finally
achieved depends on many other important issues as well.106
On the other hand, this “new normal” of a liberalised approach, not to
mention positive opening-up policies, is likely to result in more investment
and trade cooperation between China and other countries. This liberalised
approach indicates that China is adapting to international investment law
standards in its bilateral negotiations. A case in point is the 2015
China–Australia FTA, which includes investor-state dispute settlement
102
Li Keqiang Meets with Vice-President of European Commission and High Representative of
European Union for Foreign Affairs and Security Policy Federica Mogherini, MINISTRY OF
FOREIGN AFFAIRS OF THE PEOPLE’S REPUBLIC OF CHINA (May 7, 2015), http://www.fmprc.gov.
cn/mfa_eng/wjb_663304/zzjg_663340/xos_664404/xwlb_664406/t1263249.shtml.
103
Yinan Zhao & Nan Zhong, China, ASEAN Set 2015 as Goal for Upgrading Free Trade
Agreement, CHINA DAILY (Nov. 14, 2014, 5:03 AM), http://www.chinadaily.com.cn/world/2014
liattendealm/2014-11/14/content_18911581.htm.
104
In some industries, all investors are required to obtain operating licenses from the relevant
industry regulators. All of these approval procedures for operating licenses may overlap and result
in potentially redundant examinations, which is called “the door behind the door”. See Zhongmei
Wang, supra note 69, at 133.
105
Wenhua Shan & Sheng Zhang, The Potential EU–China BIT: Issues and Implications, in EU
AND INVESTMENT AGREEMENTS: OPEN QUESTION AND REMAINING CHALLENGES 87, 104 (Marc
Bungenberg et al. eds., 2013).
106
Such as performance requirement, labor and environment standards and investor-state dispute
settlement; see also KARL P. SAUVANT & HUIPING CHEN, A CHINA–US BILATERAL INVESTMENT
TREATY: A TEMPLATE FOR A MULTILATERAL FRAMEWORK FOR INVESTMENT? 1 (2012).
(hereinafter “ISDS”) provisions,107 unlike the 2003 agreement between the

parties. Such an adaption is necessary if China is to gain new insights on
how to best improve its own foreign investment legislation and
international investment negotiations. In 2014, Asia surpassed North
America as the world’s largest region for foreign investors for the first time
in history. Among the global investors, China (including Hong Kong) was
the second-largest investor in the world after the United States.108 Judging
from the long-term growth trend in China’s outward FDI, it is estimated
that this investment will exceed the inward FDI for the first time in history
in 2015.109 With the implementation of China’s “One Belt, One Road”
strategy—namely, the “Silk Road Economic Belt” and “21st-Century
Maritime Silk Road” initiatives—more Chinese enterprises will likely go
abroad to make investments, especially in the countries along the routes.
Accordingly, the Asian Infrastructure Investment Bank and the Silk Road
Fund, which invest mainly in infrastructure and resources, have been
launched to finance the initiatives. Considering the beneficial initiatives
and the country’s increasing momentum towards foreign investment, China
is expected to offer rich and low-cost resources for countries looking to
promote industrialization and spread manufacturing through a new round of
opening-up.
However, an increase in foreign investment may also mean the
possibility of more disputes. According to statistics released by the
Ministry of Commerce, there are currently 132 Sino-foreign BITs, among
which 104 are valid.110 Among these, 100 were signed before January 1,
2010, 96 of which came into force before that date. Except in the case of
Tza Yap Shum v. Republic of Peru in 2007, which involved a Hong Kong
citizen, prior to 2010 China and Chinese firms had not played an active role
before the International Centre for Settlement of Investment Disputes
(herein after “ICSID”). However, in the past five years, Chinese investors
have brought significant claims, and China has appeared before ICSID a
few times. Notably, in January 2010, Chinese investors filed a claim against
Mongolia at the Permanent Court of Arbitration. In May 2011, China faced
an ISDS claim for the first time. This claim was commenced by a
Malaysian corporation, Ekran Berhad. In September 2012, a major Chinese
firm, the insurer Ping An, took Belgium to ICSID arbitration. In November
107
Free Trade Agreement Between the Government of Australia and the Government of the
People’s Republic of China, Austl.–China, ch. 9, § B, June 17, 2015, http://investmentpolicyh
ub.unctad.org/Download/TreatyFile/148.
108
UN Conference on Trade and Development, Investment by South TNCs Continues to Grow:
Developing Asia Became the World’s Largest Investor Region, 19 GLOBAL INV. TRENDS MONITOR
1, 1 (2015), http://unctad.org/en/PublicationsLibrary/ webdiaeia2015d2_en.pdf.
109
China’s Outbound Investment Expected to Exceed FDI in 2015, XINHUA (Sept. 17, 2014, 12:00
AM), http://news.xinhuanet.com/english/china/2014-09/17/c_133648051.htm.
110
Until February 24, 2016.
462 AJWH [VOL. 11: 437
2014, ICSID accepted a second claim against China, brought by a Korean

investor, Ansung. In December 2014, an investment claim was accepted on
behalf of a Chinese state-owned enterprise (hereinafter “SOE”), Beijing
Urban Construction Group, against the Yemeni government. China has
never been so involved in ICSID arbitration practices. These cases suggest
that Chinese investors, especially certain large SOEs,111 are now more
inclined to resort to ISDS. These SOEs’ interest in ISDS may be partly
attributed to China’s “go-out” policy. Chinese firms’ rare utilization of IIAs
before 2010 may be attributable to their unfamiliarity with, and insufficient
emphasis on, ISDS. China and Chinese firms realise now the importance of
ISDS and are prepared to participate in the system, as respondents and
claimants respectively. Simultaneously, greater participation in investment
activities and recognition of the possibilities of dispute involvement require
more familiarities with international investment dispute settlement
mechanisms. Accordingly, China will need to undertake comprehensive
preparation in many related fields, such as judicial reforms, empirical
research, and talent cultivation.
VI. CONCLUSION
As China’s outward FDI is likely to exceed its inward FDI for the first
time in history in 2015, each at over US$100 billion, we are likely to see a
more open attitude toward high-standards international investment
agreements—the “new normal”. Reflecting this “new normal” is China’s
gradual recognition of pre-establishment national treatment. Both
legislation and state practices suggest that the approach of
pre-establishment national treatment with a negative list is becoming
China’s normal approach in the international investment field. At the
domestic level, this “new normal” indicates a certain degree of
liberalisation: Deepening its reforms by modifying a series of incompatible
laws and regulations, while testing possible changes to its domestic legal
regime. Yet China still has a long way to go in its exploration of an
appropriate negative list. In addition, in line with the streamlining of
administrative work and the delegation of power to lower levels, China has
demonstrated an increased focus on establishing an oversight system for
delegated matters. A stricter and more thorough oversight system can be
expected via both legislation and administrative enforcement. From an
international perspective, the embrace of a more liberal approach may
reflect a further round of opening-up. By adapting to modern international
investment law standards, China is likely to boost its investment and trade
cooperation. Nevertheless, more opportunities to cooperate with other
111
Chinese investors who brought Belgian and Yemeni governments to investment arbitrations are
both state-owned enterprises (SOEs).
countries will also bring challenges, especially with regard to the increasing
frequency with which ISDS mechanisms are being employed. Furthermore,
the substantial disparities in foreign investment protection standards across
different BITs may require long-term efforts to coordinate, renegotiate and
adjust. Ultimately, it is expected that China’s “new normal” in international
investment may be more apparent with the implementation of opening-up
strategies, the rise of its outward and inward FDI flows, and the foreseeable
balancing of its investment flows.
464 AJWH [VOL. 11: 437
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OPENING PRE-ESTABLISHMENT NATIONAL

investment law standards. This shift is having a profound influence

KEYWORDS: International Investment Agreements, National Treatment,

At the 2014 Asia-Pacific Economic Cooperation forum, President Xi

II. PRE-AND POST-ESTABLISHMENT NATIONAL TREATMENT

Developed with the aim of promoting the inflow of foreign direct

There are two dominant BIT models of admission and establishment:

investment”: Namely, free movement of investments in the states.

III. CHINA’S APPROACH TO NATIONAL TREATMENT PRIOR TO 2013

A. Introduction to China’s Initial Approach to National Treatment

None of the valid Sino-foreign BITs has adopted the pre-establishment

regarded as important to the spirit of national treatment. In the

(Dec. 16, 2002).

B. Factors Contributed to China’s Initial Approach

Before 2013, China’s attitude towards national treatment underwent a

independent principle of non-discrimination as well as the national

definition of “investment” is defined in addition to some exceptions,49 as

IV. POST-2013: SHIFTING TOWARD A PRE-ESTABLISHMENT

A. China–U.S. BIT Negotiations

People’s Republic of China and the United States of America in October

B. Reasons for the Post-2013 Shifts

Americanised in its approach to BITs.61 This may be because China is

V. THE IMPLICATIONS OF THE “NEW NORMAL”: HOME AND ABROAD

The pre-establishment national treatment with a negative list approach

The pre-establishment national treatment with a negative list approach

thereby unifying and reconstructing China’s foreign-investment law regime

responsibilities. According to the power list, governmental departments are

It is expected that pre-establishment national treatment and the

costs in IIA negotiations.

relative low political costs.

(hereinafter “ISDS”) provisions,107 unlike the 2003 agreement between the

2014, ICSID accepted a second claim against China, brought by a Korean

From Participation to Leadership in the World Economy, 34 YALE

in China], 27(4) JOURNAL OF SHANGHAI TEACHERS UNIVERSITY (SOC.

Investments, Geor.–Kuwait, October 13, 2009, http://investmentpolicy

Investments, China–Taj., March 9, 1993, 1849 U.N.T.S. 141.

Agreement Concerning the Encouragement and Reciprocal Protection of

N.G., April 12, 1991.

Agreement on Promotion, Facilitation and Protection of Investment,

China–Switz., January 27, 2009.

UN CONFERENCE ON TRADE & DEVELOPMENT, NATIONAL TREATMENT,

THE FIFTH U.S.–CHINA STRATEGIC ECONOMIC DIALOGUE JOINT

2000 STANDING COMM. NAT’L PEOPLE’S CONG. GAZ. 112, http://www.g

the People’s Republic of China] (promulgated by Standing Comm.

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