Like a powerful magnet, China continues to attract huge investment flows from Japan, the US and Europe. But legal problems with local partners and government regulators have served to dim the attraction of the Chinese market for many foreign investors. The lesson is not to avoid China, but rather to enter with eyes wide open to the different attitudes and expectations of local market participants, and develop appropriate legal strategies for coping with these differences. A new wave of treaty negotiations involving China provides cause for optimism by foreign investors who can position themselves to take maximum advantage.
In recent years, the theft of intellectual property by local partners, lack of transparency, regulatory abuse, discrimination against foreign firms and their imports, corrupt practices, refusals to pay and diversion of funds by local partners have all caused significant commercial harm to foreign investors in China. The lack of respect for contracts and an inability to enforce legal rights through local courts threaten to deny foreign investors the benefit of bargains they have struck with their local partners.
