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Although inbound FDI slowed in 2022, the People’s Republic of China (PRC) remained the number two Foreign Direct Investment (FDI) destination in the world, behind the United States. China’s initially swift economic recovery following COVID-19 reassured investors and contributed to high FDI and portfolio investments in 2021, but the continuation of the PRC’s Zero COVID policy until the end of 2022 and concerns about a lack of policy predictability lowered investor confidence, as demonstrated by FDI growth falling from 20.2 percent in 2021 to 8 percent in 2022, reaching $189 billion. On the equity side, comprehensive 2022 statistics are not yet available, but the first three quarters of 2022 witnessed net foreign portfolio divestment from China’s equity markets. The PRC’s stance on Russia’s invasion of Ukraine also contributed to third country investor concerns, especially against the backdrop of growing consideration of Environmental, Social and Governance (ESG) related impacts by investors worldwide. China has continued to develop its close economic relationship with Russia since Moscow launched its war of aggression against Ukraine. Russian energy sales to the PRC have increased in both dollar and volume terms. Some PRC companies have been subjected to additional export controls upon the basis of their ties to military programs of concern in the PRC itself as well as in Russia, Iran, and the DPRK. Certain PRC companies have been subject to listings for their nexus to government sponsored human rights violations and UN sanctions evasion. U.S. sanctions connected to espionage activities, illegal, unreported and unregulated (IUU) fishing also affected some PRC companies.

China remains a relatively restrictive environment for foreign investors due, in part, to prohibitions on investment in key sectors and unpredictable regulatory enforcement. Obstacles include ownership caps and requirements to form joint venture (JV) partnerships with local firms, industrial policies to develop indigenous capacity or technological self-sufficiency, licensing tied to localization requirements, and pressures to transfer technology as a prerequisite to gaining market access.

During the Chinese Communist Party’s (CCP) 20th Party Congress held in October 2022, Xi Jinping emphasized economic security through prioritization of self-reliance, especially in critical technologies, high tech manufacturing, and resilient supply chains. In addition to unprecedented personnel changes that rewarded loyalists over technocrats, the Party announced large-scale government and Party restructuring plans that would continue a trend of consolidating Xi’s leadership and expansion of the role of the Party in all facets of Chinese life: cultural, social, military, and economic. An increasingly assertive CCP has raised concerns among the business community about the ability of both domestic and foreign investors to make decisions based on commercial and profit considerations, rather than ideological dictates from the Party.

The PRC did make headway in opening access to the financial services sector by approving three wholly foreign owned enterprises (WFOEs) to sell mutual funds in China. These included Neuberger Berman Group (November 2022), Manulife Financial Corp (November 2022), and Fidelity International (December 2022). Data and financial rules announced in 2021 continued to create significant uncertainty surrounding the financial regulatory environment. After three years of strict zero COVID policies that shut China off from the world, restrictions on inbound travel were lifted in January 8, 2023 (after the period that this report covers). The PRC’s pandemic-related visa and travel restrictions throughout 2022 significantly affected foreign businesses operations, increasing labor and input costs and hampering the ability of companies and investors to conduct standard due diligence. Also, a slump in the property sector – which fell 5.1 percent in 2022 – played a sizable role in slowing economic growth. An assertive CCP, emphasis on national companies, and prioritization of self-reliance has heightened foreign investors’ concerns about the pace of economic reforms.Key developments in 2022 included:

  • On January 1, the National Reform and Development Commission (NDRC) and the Ministry of Commerce’s (MOFCOM) updated foreign FDI investment “negative lists” went into effect.
  • The PRC applied tax rates on selected goods originating in 29 countries and regions for 2022 in accordance with  China’s free trade agreements  (FTA), including the  Regional Comprehensive Economic Partnership (RCEP)  and the China-Cambodia FTA, both of which went into effect on January 1.
  • On February 15, the amended  Cybersecurity Review Measures (CSR Measures) went into effect, requiring a cybersecurity review before network platform operators with personal information of more than one million users can launch an overseas IPO.
  • On March 25 the National Development and Reform Commission (NDRC) issued the 2022 version of the Market Access Negative List, reducing the list of restricted or prohibitive industries from 123 to 117.
  • Shanghai – China’s financial center – underwent over two months of COVID lockdowns, from early April to June 1. Companies reported a variety of severe logistical and operational barriers during this period.
  • From mid-July through the late summer, heatwaves and droughts impacted hydropower dams as electricity usage spiked, causing authorities to limit power usage in some key economic and manufacturing hubs.
  • On June 21 the Uyghur Forced Labor Prevention Act took effect. The law prohibits importing goods into the United States that are mined, produced, or manufactured wholly or in part with forced labor in the PRC, including Xinjiang.
  • The PRC property market experienced a prolonged downturn, as new home and land sales plunged due to sagging demand exacerbated by zero-Covid restrictions and a series of policies designed to reduce leverage among property developers.  The PRC’s top 100 property developers reported a 41.3 percent decline in sales year-on-year.
  • On July 7, the Cyberspace Administration of China (CAC) issued the Measures for Security Assessment of Data Exports that laid out the regulatory requirements for allowing for cross-border data transfers, which went into effect on September 1.
  • The Joint Prevention and Control Mechanism of the PRC State Council announced 20 measures on November 11 to promote economic activity and minimize COVID-related disruptions.  In particular, the new policy ended the PRC’s “circuit breaker” policy, which penalized airlines for carrying passengers who tested positive on arrival, bringing Beijing closer to honoring its bilateral air transport agreements.
  • On December 14, the Central Committee of the Communist Party and the State Council Strategic Plan issued a “Strategic Plan for Expanding Domestic Demand,” which outlined plans to “raise the scale of consumption and investment to a new level by 2035.
Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2022 65 of 180
Global Innovation Index 2022 11 of 131
U.S. FDI in partner country ($M USD, historical stock positions) 2021 USD 118,186
World Bank GNI per capita 2021 USD 11,880


FDI has played an essential role in China’s economic development. Though the PRC remains a relatively restrictive environment for foreign investors, PRC government officials tout openness to FDI, promising market access expansion and non-discriminatory, “national treatment” for foreign enterprises through improvements to the business environment.  Yet laws and regulations imposing investment restrictions only on foreign investors, including onshoring requirements and discriminatory requirements on licensing, remain.

MOFCOM reported FDI flows grew by eight percent year-on-year, reaching $189 billion, however, until COVID restrictions were drawn down towards the end of November, foreign businesses continued to express concerns over China’s pandemic restrictions.  While comprehensive 2022 statistics were not yet available, China’s State Administration of Foreign Exchange’s (SAFE) latest balance of payments showed that in the first three quarters of 2022, foreign portfolio investments were down by $109 billion (from $177 billion in 2021), indicating that for the first three quarters of 2022, China underwent net foreign portfolio divestments. Demonstrating increasing investor discomfort with China’s policy direction, immediately after the conclusion of the 20th National Congress, the Nasdaq Golden Dragon China Index, an index of U.S.-listed Chinese stocks dropped to their lowest level in almost ten years, wiping more than $73 billion in combined assets.

In 2022, concerns with China’s COVID-19 restrictive travel restrictions were at the top of the agenda for U.S. businesses, along with concerns over the PRC’s excessive cyber security, privacy, and data-related requirements, preferential treatment for domestic companies – including state-owned enterprises – under various industrial policies, localization requirements, to qualify for state-affiliated procurement or benefits, preference for domestic technologies and products in the procurement process, an opaque regulatory system, and inconsistent application of laws protecting intellectual property rights (IPR). U.S. businesses also made requests for equal access to China’s capital markets and fair application of bankruptcy laws. U.S.-China geopolitical tensions were also cited as a significant concern. See the following:

China’s (International) Investment Promotion Agency (CIPA), under MOFCOM, oversees attracting foreign investment and promoting China’s overseas investment. Duties include implementing overseas investment policy; guiding domestic sub-national and international investment promotion agencies; promoting investment in industrial parks at the national, subnational, and cross-border level; organizing trainings in China and abroad for overseas investment projects; and, engaging international and multilateral economic organizations, foreign investment promotion agencies, chambers of commerce, and business associations. The agency has offices worldwide, including CIPA ROK Office, CIPA Europe in Hungary, CIPA Germany, and a representative office in the Hague to promote investment in the Benelux area. CIPA maintains an “ Invest in China ” website which lists laws, regulations, and rules relevant to foreign investors. CIPA has a foreign investment enterprise complaint center to handle the complaints filed by foreign invested companies. The China Association of Enterprises with Foreign Investments (CAEFI) is a non-profit organization overseen by MOFCOM. The association and corresponding provincial institutions have hotlines to receive foreign investor complaints.


Foreign investors in China must first review the nationwide foreign investment and FTZ negative lists (known as the Market Access Negative List) to determine if the sector is open to any private investment, whether domestic or foreign. Foreign investors must then review the foreign investment negative list (known as the Foreign Negative List or the Special Administrative Measures for Foreign Investment Access) to determine if the sector is open to foreign investment or has additional restrictions. This list includes a catalogue for encouraged foreign investment, which identifies the sectors and locations (often less developed regions) in which the government encourages investment.

In restricted industries, foreign investors face equity caps or JV requirements to ensure control by a PRC national and enterprise.  Due to these requirements, foreign investors that wish to participate in China’s market must enter partnerships, which sometimes require transfer of technology. Even in “open” sectors, a variety of factors, including ability to access local government officials and preferences, enhanced ability to impact local rules and standards, perceptions of better understanding of the PRC market, and access to procurement opportunities, led many foreign companies to rely on the JV structure to operate in the PRC market. The PRC also continues to tie market access to onshoring requirements, and many discriminatory obstacles exist to prevent foreign companies from obtaining licenses. Below are a few examples of industries where investment restrictions apply:

  • Establishment of clinical trials for new drugs require a PRC partner who holds the IPR tied to data drawn from the clinical research.

Examples of foreign investment sectors requiring PRC majority stake include:

  • Radio/television market survey.
  • Basic telecommunication services outside free trade zones.

Most of the changes in the 2022 Market Access Negative List affected the financial services sector. The CSRC continued to approve WFOEs to operate mutual funds in China.

Sectors that remain closed to foreign investment include rare earths, film production and distribution, and tobacco products.   However, the government continues to constrain foreign investors in a myriad of ways beyond caps on ownerships. For instance, in the pharmaceutical sector, while JV requirements were eliminated in the 1990s, foreign companies must partner with local PRC institutions for clinical trials.

Other requirements that place undue burden on foreign investors include but are not limited to: applying higher standards for quality-related testing, prohibitions on foreign parties in JVs conducting certain business activities, localization requirements, challenges in obtaining licenses and permits, mandatory intellectual property sharing – especially in cases involving biological material, and other implicit and explicit downstream regulatory approval barriers. Under the PRC’s 1993 Company Law which was amended in 1999 and again in 2004, Article 17-18 stipulates that within both domestic or foreign companies, there must be a Communist party organization, “to carry out their activities according to the Constitution of the Communist Party of China.” This is one way the CCP influences businesses, including those that are privately owned or foreign-invested. Occasionally reports surface that foreign companies – including large multinational companies – were required to change their articles of association to provide the CCP a greater mandate within the company. Companies have reported that these CCP cells have varying responsibilities across companies but can choose to get involved in vetting boards of directors and approving senior to mid-level positions at some enterprises.

The negative list regulating pilot FTZ zones was not updated in 2022 but past iterations lifted barriers to foreign investment in manufacturing sectors, widened foreign investor access to some service sectors, and allowed foreign investment into the radio and TV-based market research sector.  For the market research sector, caveats included a 33 percent foreign investor ownership cap and PRC citizenship requirements for legal representatives.
While U.S. businesses welcomed market openings, foreign investors remained underwhelmed by the PRC’s lack of progress and refusal to provide more significant liberalization.  Foreign investors noted the automotive sector openings in 2021 were inconsequential since only one foreign firm successfully obtained majority control of its joint venture operations. Although the electric vehicle (EV) sector was opened to foreign investors in 2018, most traditional foreign auto manufacturers are unable to establish independent EV operations because of their existing joint ventures. BMW was able to take majority control of its Chinese joint venture in 2022, increasing its stake from 50 to 75 percent, but only one foreign automaker has been able to operate as a WFOE. Auto sector assessments indicate that it would be extremely difficult for a traditional automaker that is already tied to a JV partner to set up an independent EV only enterprise, with some indicating that the EV space was opened in 2018, just to allow one automaker in. Foreign investors cited this was in line with the government announcing liberalization mainly in industries that domestic PRC companies already dominate or to bring in priority technologies and know-how.

In addition to the PRC’s system for managing foreign investments, MOFCOM and NDRC also maintain a system for managing which segments of the economy are open to non-state-owned investors.

The  Measures for Security Reviews on Foreign Investments   came into effect January 18, 2021, revising the PRC’s framework for vetting foreign investments that could affect national security. The NDRC and the Ministry of Commerce will administer the new measures which establish a mechanism for reviewing investment activities across a range of sectors perceived to implicate PRC national security, including agriculture, energy and resources, cultural products, and more.


China is not a member of the Organization for Economic Co-Operation and Development (OECD), but the OECD Council established a country program of dialogue and co-operation with China in October 1995. The OECD completed its most recent investment policy review for China in 2022.
OECD 2022 Report 

China’s 2001 accession to the World Trade Organization (WTO) boosted its economic growth and advanced its legal and governmental reforms.  The WTO completed its most recent trade policy review for China in 2021, highlighting FDI grew at a slower pace than in previous periods but remains a major driver of global growth and a key market for multinational companies. USTR also published its annual 2022 Report to Congress on China’s WTO Compliance.


Created in 2018, the State Administration for Market Regulation (SAMR) is responsible for business registration processes.  Under SAMR’s registration system, parties are required to report when they (1) establish a Foreign Invested Enterprise (FIE); (2) establish a representative office in China; (3) acquire stocks, shares, assets or other similar equity of a domestic China-based company; (4) re-invest and establish subsidiaries in China; and (5) invest in new projects.  Foreign companies still report challenges setting up a business relative to their PRC competitors. Many companies offer consulting, legal, and accounting services for establishing operations in China. Investors should review their options carefully with an experienced advisor before investing.


Since 2001, China has pursued a “going-out” investment policy.  At first, the PRC encouraged SOEs to invest overseas, but in recent years, China’s overseas investments have diversified with both state and private enterprises investing in nearly all industries and economic sectors.  China remains a major global investor and in 2022, total outbound direct investment (ODI) was $146.5 billion, according to a statement  by China’s Ministry of Commerce.

China’s government created “encouraged,” “restricted,” and “prohibited” outbound investment categories to suppress significant capital outflow pressure in 2016 and to guide PRC investors to more “strategic sectors.” The  Sensitive Industrial-Specified Catalogue of 2018   further restricted outbound investment in sectors like property, cinemas, sports teams, and non-entity investment platforms and encouraged outbound investment in sectors that supported PRC national objectives by acquiring advanced manufacturing and high-tech assets.  PRC firms involved in sectors cited as priorities in the Strategic Emerging Industries, New Infrastructure Initiative, and MIC 2025 often receive preferential government financing and subsidies for outbound investment.

In 2006, the PRC established the Qualified (QDII) program to channel domestic funds into offshore assets through financial institutions. While the quota tied to this program has fluctuated over the years based on capital flight concerns, in 2021 the State Administration of Foreign Exchange (SAFE) approved new quotas for 17 institutions under the program to allow a potential $147.3 billion in outbound investment.

In 2013, the PRC government established a pilot program allowing global asset management companies more opportunities to raise RMB-denominated funds from high net-worth PRC-based individuals and institutional investors to invest overseas. These programs include the Qualified Domestic Limited Partnership (QDLP) pilot program and the Shenzhen-specific Qualified Domestic Investment Entity (QDIE) program. In 2021, the China Securities Regulatory Commission (CSRC) and SAFE expanded the pilot areas to at least seven jurisdictions and quotas for the QDLP to $10 billion, respectively. In April, the Shenzhen Financial Regulatory Bureau amended the Administrative Measures of Shenzhen for Implementation of the Pilot Program for Overseas Investment by Qualified Domestic Investors (“Shenzhen QDIE Measures”) to include investments in the securities market that aligns it with the QLDP program. By the end of July 2022, Shenzhen had set up 71 QDIE management enterprises, with quota amount of US $2 billion.

According to UNCTAD, China has 145 bilateral investment treaties (BITs) in force and multiple free trade agreements (FTAs) with investment chapters.  China has negotiated 22 trade agreements, with 16 of those agreements signed and in force. An FTA with Cambodia and an upgraded FTA with New Zealand came into effect in 2022, on January 1 and April 7, respectively. China has an additional ten FTAs under negotiations, and eight FTAs under consideration. These agreements cover topics like expropriation, most-favored-nation treatment, and investment arbitration mechanisms. Relative to U.S.-equivalent agreements, PRC agreements generally offer fewer protections to foreign investors. For a list of China’s signed FTAs, please  click here . For a list of China’s BITs, please  click here.   

Ratification of the EU-China Comprehensive Agreement on Investment (CAI) remained suspended over the year. The United States and China do not have a BIT and last held BIT negotiations in 2017. In 1984, the United States and the PRC concluded a bilateral taxation treaty. As of December 31, 2021, the PRC had concluded tax treaties/ arrangements with 107 countries/regions. A full list of PRC- signed tax treaties is  here  . The PRC is one of the 141 members of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS).


One of China’s WTO accession commitments was to establish an official journal dedicated to the publication of laws, regulations, and other measures pertaining to or affecting trade in goods, services, trade related aspects of IPR (TRIPS), and the control of foreign exchange. Despite mandatory 30-day public comment periods, PRC ministries continue to post only some draft administrative regulations and departmental rules online, often with a public comment period of less than 30 days. As part of the Phase One Agreement, China committed to providing at least 45 days for public comment on all proposed laws, regulations, and other measures implementing the Phase One Agreement. While China has made some progress, U.S. businesses operating in China consistently cite arbitrary legal enforcement and the lack of regulatory transparency among the top challenges of doing business in China.

In China’s state-dominated economic system, the relationships between the CCP, the PRC government, PRC business (state- and private-owned), and other PRC stakeholders are blurred. Foreign enterprises perceive that China prioritizes political goals, industrial policies, and a desire to protect social stability at the expense of foreign investors, fairness, and the rule of law. The World Bank Global Indicators of Regulatory Governance gave China a composite score of 1.75 out 5 points, attributing China’s relatively low score to stakeholders not having easily accessible and updated laws and regulations; the lack of impact assessments conducted prior to issuing new laws; and other concerns about transparency.

For accounting standards, PRC companies use the Chinese Accounting Standards for Business Enterprises (ASBE) for all financial reporting within mainland China. Companies listed overseas or in Hong Kong may choose to use ASBE, the International Financial Reporting Standards, or Hong Kong Financial Reporting Standards.

While the PRC government announced several policies in 2021 to support ESG reporting, they remain voluntary, lack verification mechanisms, and are focused on impact, not governance. Only eighteen  PRC companies are signatories to the UN Principles for Responsible Investment. The PRC’s green finance taxonomy known as the “Catalogue of Green Bond Supported Projects” and ESG-like principles for overseas development initiatives outlined in the Guiding Opinions on Promoting Green Belt and Road Construction are voluntary and lack verification mechanisms. However, the PBOC and the European Commission launched a sustainable finance taxonomy to create comparable standards on green finance products on November 4, 2021. China’s goal to peak carbon emissions before 2030 and reach carbon neutrality by 2060 may increase reporting on decarbonization plans and could increase alignment with international standards such as those outlined in the Task Force on Climate-Related Financial Disclosures (TCFD) recommendations. A lack of quality data and a shortage of third-party auditors further hinder expansion of ESG reporting.

MEE’s disclosure  rules  requiring five types of domestic entities to disclose environmental information on an annual basis came into effect February 8, 2022. The rules will apply only to listed companies and bond issuers that were subject to environmental penalties the previous year and other MEE-identified entities, including those that discharged high levels of pollutants. Entities must disclose information on environmental management, pollution generation, carbon emissions, and contingency planning for environmental emergencies. These same companies and bond issuers must also disclose climate change and environmental protection information related to investment and financing transactions.

On June 28, 2021, the CSRC issued final amendments requiring listed companies disclose environmental penalties and encouraging carbon emissions disclosures. It also issued guidelines on the format and content of annual reports and half-year reports of listed companies, requiring them to set up a separate “Section 5 Environmental and Social Responsibility” to encourage carbon emission reduction related disclosure. In May 2021 the Ministry of Ecology and Environment (MEE) issued a  plan  for strengthening environmental disclosure requirements by 2025. Most contacts assessed foreign investors are the key drivers of increased ESG disclosures.


As part of its WTO accession agreement, China agreed to notify the WTO Committee on Technical Barriers to Trade (TBT) of all draft technical regulations. However, China continues to issue draft technical regulations without proper notification to the TBT Committee.

The PRC is also a member of the Regional Comprehensive Economic Partnership (RCEP), which entered into force on January 1, 2022. Although RCEP has some elements of a regional economic bloc, many of its regulatory provisions (for example on data flow) are weakened by national security exemptions.
China’s application to join the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) remains under consideration by member states. The PRC would face challenges in addressing obligations related to SOEs, labor rights, digital trade, and increased transparency.


China’s legal system borrows heavily from continental European legal systems, but with “Chinese characteristics.” The rules governing commercial activities are found in various laws, regulations, departmental rules, and Supreme People’s Court (SPC) judicial interpretations, among other sources. While China does not have specialized commercial courts, it has created specialized courts and tribunals for the hearing of intellectual property disputes (IP), including in Beijing, Guangzhou, Shanghai, and Hainan, as well as specialized Internet courts for the handling of disputes arising from conduct online.  The PRC’s constitution and laws are clear that PRC courts cannot exercise power independent of the Party. Further, in practice, influential businesses, local governments, and regulators routinely influence courts. Outside of the IP space, U.S. companies often hesitate in challenging administrative decisions or bringing commercial disputes before local courts due to perceptions of futility or fear of government retaliation.


The PRC’s new Foreign Investment Law, the FIL, came into force on January 1, 2020, replacing the previous foreign investment framework. The FIL provides a five-year transition period for foreign enterprises established under previous foreign investment laws, after which all foreign enterprises will be subject to the same domestic laws as PRC companies, such as the Company Law. The FIL standardized the regulatory regimes for foreign investment by including the negative list management system, a foreign investment information reporting system, and a foreign investment security review system all under one document. The FIL also seeks to address foreign investors complaints by potentially banning forced technology transfers, promising better IPR, and the establishment of a complaint mechanism for investors to report administrative abuses. However, foreign investors remain concerned that the FIL and its implementing regulations provide PRC ministries and local officials significant regulatory discretion, including the ability to retaliate against foreign companies.

The December 2020 revised investment screening mechanism under the Measures on Security Reviews on Foreign Investments (briefly discussed above) came into effect January 18, 2021, without any period for public comment or prior consultation with the business community. Foreign investors complained China’s new rules on investment screening were expansive in scope, lacked an investment threshold to trigger a review, and included green field investments – unlike most other countries. Moreover, new guidance on Neutralizing Extra-Territorial Application of Unjustified Foreign Legislation Measures, a measure often compared to “blocking statutes” from other markets, added to foreign investors’ concerns over the legal challenges they would face in trying to abide by both their host-country’s regulations and China’s. Foreign investors complained that market access in China was increasingly undermined by national security-related legislation. While not comprehensive, a list of official PRC laws and regulations is here. 

On June 10, 2021, the Standing Committee of the NPC adopted the Law of the People’s Republic of China on Countering Foreign Sanctions (“Anti-Foreign Sanctions Law” or AFSL). The AFSL gives the government explicit authority to impose countermeasures related to visas, deportation, and asset freezing against individuals or organizations that broadly endanger China’s “sovereignty, security, or development interests.” The law also calls for Chinese citizens and organizations harmed by foreign “sanctions” to pursue damages via PRC civil courts.

On October 13, 2021, MOF issued a circular prohibiting discrimination against foreign-invested enterprises (FIEs) in government procurement for products “produced in China.” The circular required that suppliers not be restricted based on ownership, organization, equity structure, investor country, or product brand, to ensure fair competition between domestic and foreign companies. The circular also required the abolition of regulations and practices violating the circular by the end of November, including the establishment of alternative databases and qualification databases. This circular may have been intended to address the issuance of Document No. 551 in May by MOF and the Ministry of Industry and Information Technology (MIIT) (without publishing on official websites), titled “Auditing guidelines for government procurement of imported products,” outlining local content requirements for hundreds of items, many of which are medical devices, including X-ray machines and magnetic resonance imaging equipment. It is unclear whether Document 551 will be rescinded or revised based on this circular. Additionally, the circular applies only to FIEs and does not provide fair treatment for imported products from companies overseas. While the circular does state FIEs should be afforded equal treatment, the circular does not address concerns about localization pressures created by Document 551. Further, the circular provides no guidance on what constitutes a “domestic product” and does not address treatment of products manufactured in China that incorporate content from other jurisdictions, key concerns for a wide range of U.S. firms.

FDI Requirements for Investment Approvals  

Foreign investments in industries and economic sectors that are not explicitly restricted on China’s negative lists do not require MOFCOM pre-approval.  However, investors complained that in practice, investing in an industry not on the negative list does not guarantee a foreign investor “national treatment,” or treatment no less favorable than treatment accorded to a similarly situated domestic investor.  Foreign investors must comply with other steps and approvals such as receiving land rights, business licenses, and other necessary permits.  When a foreign investment needs ratification from the NDRC or a local/sub-national NDRC office, that administrative body oversees assessing the project’s compliance with a panoply of PRC laws and regulations. In some cases, NDRC solicits the opinions of relevant industrial regulators and consulting agencies acting on behalf of domestic firms, creating potential conflicts of interest disadvantageous to foreign firms.


China’s newly revised Anti-Monopoly Law (AML) came into effect on August 1, 2022. Changes included stepped-up fines for AML violations and specification of the factors to consider in determining whether an undertaking in the internet sector has abused a dominant market position. In February 2021, SAMR published (after public comment) six AML-related department rules, including “Antitrust Guidelines for the Platform Economy” and the “Provisions Prohibiting IP Abuse to Preclude or Restrict Competition”, among others. The Platform Guidelines address monopolistic behaviors of online platforms operating in China, while the IP Abuse Provisions address monopolistic abuse of intellectual property rights. China also included its fair competition review system into the newly revised AML.

In November 2021, the PRC government announced transformation of the Anti-Monopoly Bureau of the SAMR, renaming it the National Anti-Monopoly Administration, reorganizing the existing structure into three new divisions, and adding staff to double in size. The National Anti-Monopoly Administration enforces the AML and oversees competition issues at the central and provincial levels.  The bureau reviews mergers and acquisitions, and investigates cartel and other anticompetitive agreements, abuse of a dominant market positions, including those related to IP, and abuse of administrative powers by government agencies. The bureau also oversees the Fair Competition Review System (FCRS), which requires government agencies to conduct a review prior to issuing new and revising administrative regulations, rules, and guidelines to ensure such measures do not restrict competition. SAMR issues implementation guidelines to fill in gaps in the AML, address new trends in China’s market, and help foster transparency in enforcement. Generally, SAMR has sought public comment on proposed measures, although comment periods are sometimes less than 30 days.
Foreign companies have long expressed concern that the government uses AML enforcement in support of China’s industrial policies, such as promoting national champions, particularly for companies operating in strategic sectors. The AML explicitly protects the lawful operations of government authorized monopolies in industries that affect the national economy or national security. U.S. companies expressed concerns that in SAMR’s consultations with other PRC agencies when reviewing M&A transactions, those agencies raise concerns not related to competition concerns to block, delay, or force transacting parties to comply with preconditions – including technology transfer – to receive approval. The amended AML also featured a new provision mandating that “antimonopoly work [must] uphold the leadership of the Communist Party of China”, which is viewed as a further signal to U.S. businesses operating here that China’s competition law enforcement is motivated and guided by factors outside traditional considerations found in jurisdictions adhering to the rule of law.


China’s law prohibits nationalization of FIEs, except under vaguely specified “special circumstances” where there is a national security or public interest need. PRC law requires fair compensation for an expropriated foreign investment but does not detail the method used to assess the value of the investment.  The Department of State is not aware of any cases since 1979 in which China has expropriated a U.S. investment, although the Department has notified Congress through the annual 527 Investment Dispute Report of several cases of concern.


ICSID Convention and New York Convention  

China is a contracting state to the Convention on the Settlement of Investment Disputes (ICSID Convention) and has ratified the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention).  PRC legislation that provides for enforcement of foreign arbitral awards related to these two Conventions includes the Arbitration Law, the Civil Procedure Law, and other laws with similar provisions that have embraced many of the fundamental principles of the United Nations Commission on International Trade Law’s Model Law on International Commercial Arbitration.  However, in some disputes, PRC courts have refused to enforce arbitral awards they deem violate public interest and policy. Further, the process by which PRC courts – and ultimately the Supreme People’s Court – agree or refuse to enforce an arbitral award is opaque, and U.S. companies seeking enforcement of such awards are often left in the dark for years awaiting a determination.

Investor-State Dispute Settlement (ISDS)

As China has become a capital exporter under its “Going Global” initiative and through infrastructure investments under BRI, its views on ISDS have shifted to allow foreign investors with unobstructed access to international arbitration to resolve any investment dispute that cannot be amicably settled within six months. PRC investors did not use investor-state dispute settlement (ISDS) mechanisms until 2007, and the first known ISDS case against China was initiated in 2011 by Malaysian investors. China is a signatory to the International Centre for Settlement of Investment Disputes (ICSID) under the World Bank which provides arbitration under ICSID and United Nations Commission on International Trade Law (UNCITRAL) rules. China submitted a proposal on ISDS reform to the UNCITRAL Working Group III in 2019. Under the proposal, China reaffirmed its commitment to ISDS as an important mechanism for resolving investor-state disputes under public international law. However, it suggested various pathways for ISDS reform, including supporting the study of a permanent appellate body.

International Commercial Arbitration and Foreign Courts  

PRC officials typically urge private parties to resolve commercial disputes through informal mediation. If formal mediation is necessary, PRC parties and the authorities typically prefer arbitration to litigation. Many contract disputes require arbitration by the Beijing-based China International Economic and Trade Arbitration Commission (CIETAC). Established by the State Council in 1956 under the auspices of the China Council for the Promotion of International Trade (CCPIT), CIETAC is China’s most widely utilized arbitral body for foreign-related disputes. Some foreign parties have obtained favorable rulings from CIETAC, while others have questioned CIETAC’s fairness and effectiveness. Besides CIETAC, there are also provincial and municipal arbitration commissions. A foreign party may also seek arbitration in some instances from an offshore commission. Foreign companies often encounter challenges in enforcing arbitration decisions issued by PRC and foreign arbitration bodies.  In these instances, foreign investors may appeal to higher courts. The government of China and its judicial bodies do not maintain a public record of investment disputes. The SPC maintains an annual count of the number of cases involving foreigners but does not provide details about the cases.

In 2021, the CIETAC handled 636 foreign-related cases, of which 136 cases are involved with China’ One Belt and One Road Initiative.

In 2018, the SPC established the China International Commercial Courts (CICC) to adjudicate international commercial cases, especially cases related to BRI. Two SPC’s CICCs are respectively installed in Shenzhen and Xian. Despite its international orientation, CIIC’s 16 judges are all PRC citizens and Mandarin Chinese is the court’s working language. Parties to a dispute before the CICC can only be represented by PRC law-qualified lawyers, as foreign lawyers do not have a right of audience in China’s courts; and unlike other international courts, foreign judges are not permitted to be part of the proceedings. Judgments of the CICC, given it is a part of the SPC, cannot be appealed from, but are subject to possible “retrial” under the Civil Procedure Law.

By the end of 2020, the China International Commercial Court had heard 18 cases and completed 8 cases. The cases involved foreign parties from the United States, the Philippines, Japan, Italy, Thailand, the Philippines, etc. In addition, eight municipalities have also established international commercial local courts within their local courts.

Without distinguishing which courts handled the cases, the President of the Supreme People’s Court reported  October 28 to the National People’s Congress Standing Committee that in 2021, PRC courts had handled 27,300 “foreign-related civil and commercial cases” involving over 100 countries.

China has bilateral agreements with 27 countries on the recognition and enforcement of foreign court judgments, but not with the United States. Under PRC law, courts must prioritize the Party’s needs, China’s laws, and other regulatory measures above foreign court judgments.

Comprehensive data on investments disputes over the last ten years involving a U.S. or international person was not available, however, there have been limited instances of PRC courts enforcing U.S. court (or other foreign court) decisions on the basis of reciprocal treatment. But some companies reported that they believed the resolution of their dispute was not consistent with local laws or with international business practices. It is unclear what the trend on enforcement of foreign judgments will be. Businesses also reported that that in 2022, it had become more difficult to access Chinese data from outside of China. For example, trademark filings and court case databases became inaccessible outside of China or require registration with a PRC phone number. China also made legislative changes to address upper-level statutory damages, but there was no data available about whether the courts were issuing higher damages.


The PRC introduced bankruptcy laws in 2007, under the Enterprise Bankruptcy Law (EBL), which applies to all companies incorporated under PRC laws and subject to PRC regulations. In May 2020, the PRC released the Civil Code, contract and property rights rules. The NPC listed amendments to the EBL as a top work priority for 2021 and 2022. According to the NPC website in November 2022, the NPC has worked out an initial amendment draft and is soliciting opinions from delegates, which has not yet been released to the public, and will accelerate the legislative process and submit it to NPC Standing Committee for reading and review as soon as possible. Court-appointed administrators – law firms and accounting firms that help verify claims, organize creditors’ meetings, list, and sell assets online – look to handle more cases and process them faster.  As of 2021 official statements cited 5,060 institutional administrators and 703 individual administrators.

On August 18, 2021, the Law Enforcement Inspection Team of the Standing Committee of the NPC submitted its report on the enforcement of enterprise bankruptcy to the 30th meeting of the Standing Committee of the Thirteenth NPC for deliberation. The report  is available publicly at the NPC website. The report found that from 2007 to 2020, courts at all levels nationwide accepted 59,604 bankruptcy cases, and concluded 48,045 bankruptcy cases (in 2020 there were 24,438 liquidation and bankruptcy cases). Of the total liquidation and bankruptcy cases recorded in 2020, 90 percent involved private enterprises. The announcement also cited the allocation of additional resources, including the establishment of at least 14 bankruptcy tribunals and 100 Liquidation & Bankruptcy Divisions and specialized collegial panels to handle bankruptcy cases. As of August 2021, bankruptcy cases are handled by 417 bankruptcy judges, 28 high people’s courts, and 284 intermediate people’s courts.

The government added a new court in Haikou and Changzhou in December 2021 and April 2022 respectively. Zhejiang also established new bankruptcy courts in Hangzhou and in Wenzhou.

Official national data is unavailable for 2021 or 2022, but local courts released information covering five-year spans that suggest as of November 30, 2022, Haikou court had accepted 342 liquidation and bankruptcy cases and Changzhou court accepted 762 liquidation and bankruptcy cases in 2022. According to the Jiangsu People’s High Court 2022 report, over the past five years, Jiangsu closed 14,000 bankruptcy cases, which released frozen assets valued at over 1 trillion RMB. Zhejiang People’s High Court 2022 report, covering the 2018-2022 period reported that it closed 16,000 bankruptcy cases, releasing frozen financial assets valued at over 480 billion RMB. Anhui province reported concluding 2,120 bankruptcy cases, which released frozen assets valued over 149.5 billion RMB. Finally, a 2022 Shanghai People’s High Court report disclosed it had reached a judgement on 1,288 bankruptcy cases in 2022, unfreezing assets valued at 65 billion RMB.

Various sub-national reports also confirmed a 99 percent increase in accepted liquidation and bankruptcy cases in Nanjing, the capital city of Jiangsu province from June 2020 to June 2022. While many property developers defaulted on various forms of debt in 2022 – including Evergrande – none were restructured or declared bankrupt by the end of the reporting period. In addition to the real estate sector, the financial sector experienced several high-profile bankruptcy cases in 2022. In July, the China Banking and Insurance Regulatory Commission (CBIRC) approved the entry of the New China Trust Co, Ltd into bankruptcy proceedings, and the Beijing financial court accepted the reorganization of 1an Property Insurance Co, Ltd. The CBIRC approved the start of bankruptcy proceedings for Liaoyang Rural Commercial Bank and Liaoning Taizihe Village Bank in August 2022, and for Zhongwang Group Finance Co, Ltd in September.

While PRC authorities are taking steps to address corporate debt and are gradually allowing some companies to fail, companies generally avoid pursing bankruptcy because of the potential for local government interference and fear of losing control over the outcome. According to the SPC, 2.899 million enterprises closed business in 2020, of which only 0.1 percent or 3,908 closed because of bankruptcy.

In August 2020, Shenzhen released the Personal Bankruptcy Regulations of Shenzhen Special Economic Zone, which took effect on March 1, 2021. This was the PRC’s first regulation on personal bankruptcy. On July 19, 2021, the Shenzhen Intermediate People’s Court of Guangdong Province, China served a ruling on Liang Wenjin approving his personal bankruptcy reorganization plan. This was the first personal bankruptcy case closed by Shenzhen Court since the implementation of the Personal Bankruptcy Regulations of Shenzhen Special Economic Zone and is the first personal bankruptcy reorganization case in China. From its opening in March 2020 through the end of calendar year 2022, the court had received 1308 individual bankruptcy applications total, of which 171 (13%) have been concluded, with bankruptcy proceedings initiated in 80 of the concluded cases (47%).

The Personal Bankruptcy Regulations is China’s first set of rules on personal bankruptcy, which formally establishes the personal bankruptcy system in China for the first time. At present, the Personal Bankruptcy Regulations is only applicable in Shenzhen. Numerous other localities have also begun experimenting with legal remedies for personal insolvency, in part to deter debtors from taking extreme measures to address debt.


To attract foreign investment, different provinces and municipalities offer preferential packages like a temporary reduction in taxes and/or import/export duties, reduced costs for land use, research and development subsidies, and funding for initial startups. Often, these packages stipulate that foreign investors must meet certain benchmarks for exports, local content, technology transfer, or other requirements. However, many economic sectors that China deems sensitive due to broadly defined national or economic security concerns remain closed to foreign investment. One key incentive is making market access contingent on domestic manufacturing.

China’s incentives for building out its renewables sectors have gone through rapid development since 2020. The PRC has used a variety of incentives, including feed-in tariffs, tax incentives, and subsidies to encourage investment in and build out of wind, solar, and other clean energies. As onshore wind and solar achieve grid parity, the PRC no longer subsidizes new offshore wind projects and solar thermal projects. However, several provinces continue to offer preferential electricity rates and the central government oversees green certificate trading and dispatch authority trading mechanisms designed to help renewable projects secure extra revenues.

As part of efforts to continue attracting green investment, on June 3, 2022, the International Platform for Sustainable Finance (IPSF), co-chaired by China and the EU, updated the “Common Ground Taxonomy-Climate Change Mitigation”  (hereinafter referred to as “the updated version of the CGT) to scale up the mobilization of green capital internationally. Compared with the 2021 version released during the United Nations Climate Change Conference (COP26) last year, the updated version of the CGT has not only adopted market feedback but also added 17 economic activities assessed and confirmed by Chinese and European experts, including economic activities that are important for the green transformation of the construction and manufacturing industries. On June 9, Bank of China Frankfurt Branch issued $500 million in green bonds based on the updated version of CGT to support green projects in China, Germany, Netherlands, and other countries.

Progress on transition finance has been promoted at both the multilateral and unilateral level as a way to address climate change. China has taken steps on “transition finance,” including the development of a transition finance taxonomy led by the People’s Bank of China, establishment of pilot zones for green finance reform, and developing locality- and industry-specific taxonomies.


In 2013, the State Council announced the Shanghai pilot FTZ to provide open and high-standard trade and investment services to foreign companies. China gradually scaled up its FTZ pilot program to a total of 20 FTZs and one Free Trade Port (FTP), which are in all or parts of Fujian, Guangdong, Guangxi, Hainan (FTZ and FTP), Hebei, Heilongjiang, Henan, Hubei, Jiangsu, Liaoning, Shaanxi, Shandong, Sichuan, Yunnan, and Zhejiang provinces; Beijing, Chongqing, Shanghai, and Tianjin municipalities. The goal of China’s FTZs/FTP is to provide a trial ground for trade and investment liberalization measures and to introduce service sector reforms, especially in financial services, that China expects to eventually introduce in other parts of the domestic economy. The FTZs promise foreign investors “national treatment” investment in industries and sectors not listed on China’s negative lists.
Special Economic Zones (SEZs) in China include: Shantou, Shenzhen, Zhuhai, (Guangdong Province); Xiamen (Fujian Province) Hainan Province; Shanghai Pudong New Area; and Tianjin Binhai New Area.

In 2021, the PRC formulated the first negative list in the field of cross-border trade in services, effective in Hainan Free Trade Port. Separately, the PRC government has shortened the negative list for foreign investment in Pilot Free Trade Zones. In 2021, the seventh revision to the free trade zone negative list reduced close off sectors from 30 items to 27 items. Please see above section on negative lists for more details.


In 2022, China continued to build out its expansive regulation of data. The Data Security Law and Personal Information Protection Law entered into force with new implementing regulations. These new laws operate together with the Cybersecurity Law, which took effect in June 2017, the National Security Law, which has been in effect since 2015; and various implementing measures to prohibit or severely restrict cross-border transfers of information that are routine in the ordinary course of business and are fundamental to any business activity. These laws and measures also impose local data storage and processing requirements on companies that collect “important data,” which remains a broad and vaguely defined term. They also suggest that China intends to apply these restrictions and requirements not only to companies that are considered to operate in “critical information infrastructure sectors,” another broad and vaguely defined term, but also to companies operating in other sectors. Given the wide range of business activities that are dependent on cross-border transfers of information and flexible access to global computing facilities, these developments have generated serious concerns among foreign governments as well as among stakeholders in the United States and other countries, including among services suppliers. A related concern expressed by industry pertains to the increasing restrictions, pursuant to China’s data governance regime, on access to nominally public or commercially available information about economic and commercial conditions in China. These laws are primarily enforced by the CAC while the Ministry of Industry and Information Technology (MIIT) and Ministry of Public Security (MPS) also have more limited enforcement roles.

In 2022, implementing measures for China’s Cybersecurity Law remained a continued source of serious concern for U.S. companies since the law’s enactment in 2016. Of particular concern for companies and the research community are the Measures for Cybersecurity Review, which came into effect on September 1, 2022. This measure implements one element of the cybersecurity regime created by the Cybersecurity Law. Specifically, the measure puts in place a review process to regulate the purchase of information and communications technology (ICT) products and services by critical information infrastructure operators and online platform operators in China. The review process is to consider, among other things, potential national security risks related to interruption of service, data leakage, and reliability of supply chains.

As demonstrated in implementing measures for the Cybersecurity Law, China’s approach is to impose severe restrictions on a wide range of U.S. and other foreign ICT products and services with an apparent goal of supporting China’s technology localization policies by encouraging the replacement of foreign ICT products and services with domestic ones. U.S. and other stakeholders and governments around the world expressed serious concerns about requirements that ICT equipment and other ICT products and services in critical sectors be “secure and controllable,” as these requirements are used by the Chinese government to disadvantage non-PRC firms in multiple ways.

Performance Requirements

As part of China’s WTO accession agreement, the PRC government promised to revise its foreign investment laws to eliminate sections that imposed on foreign investors requirements for export performance, local content, balanced foreign exchange through trade, technology transfer, and research and development as a prerequisite to enter China’s market. In practice, China has not completely lived up to these promises. Some U.S. businesses report that local officials and regulators sometimes only accept investments with “voluntary” performance requirements or technology transfer that develop certain domestic industries and support the local job market.

Foreign companies also continue to report that PRC government officials may condition investment approval on a requirement that a foreign company transfer technology, conduct research and development (R&D) in China, satisfy performance requirements relating to exportation or the use of local content, or make valuable, deal-specific commercial concessions. Over the years, the United States has repeatedly raised concerns with the PRC about its restrictive investment regime. This sustained bilateral engagement has not led to a significant relaxation of China’s investment restrictions, apart from the financial services sectors.

Data Requirements

Various draft and recently finalized measures that implement the PRC’s Cybersecurity Law, Data Security Law, and Personal Information Protection Law, could prohibit, or severely restrict cross-border transfers of certain information that are routine in the ordinary course of business and are fundamental to any business activity. These measures also impose local data storage and processing requirements on companies designated as “critical information infrastructure operators” a term that the Cybersecurity Law defines in broad and vague terms. The PRC’s recently implemented Data Security Law and Personal Information Protection Law also include restrictions on cross-border data flows and requirements to store and process certain data locally. Given the wide range of business activities that are dependent on cross-border transfers of information and flexible access to global computing facilities, these developments have generated serious concerns among governments as well as among stakeholders in the United States and other countries, including among services suppliers.

Cybersecurity Law implementing regulations, to include Cybersecurity Review Measures implemented in February 2022, stipulate several circumstances where companies operating in the PRC must request a government review of their cross-border data transfers. Though these measures appear to apply similarly to domestic and foreign-based companies, the actual effect severely impacts multinational companies that must transfer data to regional or global offices in the normal course of business. Similar measures from June 2020 put in place a review process to regulate the purchase of ICT products and services by critical information infrastructure operators in the PRC. The review process considers the potential national security risks related to interruption of service, data leakage, and reliability of supply chains.

Use of ICT products and services is increasingly dependent on robust encryption, an essential functionality for protecting privacy and safeguarding sensitive commercial information. Onerous requirements on the use of encryption, including intrusive approval processes and, in many cases, mandatory use of indigenous encryption algorithms (e.g., WiFi and 4G/5G products), continue to be cited by U.S.-based investors operating in the PRC market as significant concerns.


The government of China owns all urban land and only the state can issue long-term land leases to individuals and companies, including foreigners, subject to many restrictions. China’s property law stipulates that residential property rights renew automatically, while commercial and industrial grants renew if they do not conflict with other public interest claims. Several foreign investors have reported revocation of land use rights so that PRC developers could pursue government-designated building projects. Investors often complain about insufficient compensation in these cases. In rural China, the registration system suffers from unclear ownership lines and disputed border claims, often at the expense of local farmers whom village leaders exclude in favor of “handshake deals” with commercial interests. China’s Securities Law defines debtor and guarantor rights, including rights to mortgage certain types of property and other tangible assets, including long-term leases. PRC law does not prohibit foreigners from buying non-performing debt, but it must be acquired through state-owned asset management firms, and it is difficult to liquidate. Under the terms of the Phase 1 agreement, U.S. firms can apply for asset management licenses and directly buy non-performing debt from Chinese banks.


The PRC remained on the USTR Special 301 Report Priority Watch List in 2022 and was subject to continued Section 301 monitoring. Multiple PRC-based physical and online markets were included in the 2022 USTR Review of Notorious Markets for Counterfeiting and Piracy.

Of note, in 2021, China enacted amendments to the Patent Law, Copyright Law, and Criminal Law, as well as other measures aimed at addressing IP protection and enforcement. While rights holders have welcomed these developments, they continued to raise concerns about the adequacy of these measures and their effective implementation, as well as about long-standing issues like bad faith trademarks, counterfeiting, and online piracy.

In 2022, the PRC government continued to issue measures on a wide range of IP issues, including changes relating to commitments in the Phase One Trade Agreement, although the pace and scope of reform slowed compared to prior years. IP protection and enforcement agencies issued a range of final and draft measures to implement high-level IP legislation issued by the National People’s Congress in 2020 and 2021, as well as made adjustments to existing policies. For example, in July 2022, CNIPA issued Guiding Opinions on Strengthening the IP Appraisals, in an effort to standardize the assessment of technical issues during IP enforcement proceedings, and to create coordinating mechanisms to share these assessments between administrative, judicial and criminal enforcement authorities. In another example, the Supreme People’s Court issued several measures clarifying the jurisdictions of People’s Court’s in handling IPR disputes, as well as an official opinion regarding use of blockchain technology by PRC courts. These and numerous other measures by enforcement authorities brought needed clarity on a range of IPR enforcement matters.

In addition to rule-making, enforcement authorities implemented changes in practice that benefited or will benefit U.S. rights holders. For example, in 2022, PRC courts increasingly refused to support infringement litigation brought by parties that obtained IP rights in bad faith. Relatedly, PRC courts appeared more willing to grant damages to legitimate rights holders whose rights – primarily trademark rights – had been registered by third parties in bad faith and without authorization. Both of these trends will create greater deterrence against bad faith filings in China, as well as give U.S. rights holders additional tools in penalizing bad faith actors, creating a more predictable business environment.

Despite these favorable developments, IP rights remain subject to PRC Party and State policy objectives. For U.S. companies in China, infringement remained both rampant and a low-risk “business strategy” for bad-faith actors. Further, enforcement and regulatory authorities continue to signal to U.S. rights holders that application of China’s IP system remains subject to the discretion of the PRC government and its industrial policy and innovation goals, which resulted in, among other things, wide-spread delays for IP enforcement matters involving U.S. parties, particularly before PRC courts. High-level remarks by President Xi Jinping and other senior leaders continued to signal the importance of intellectual property in developing “indigenous innovation,” free from foreign control, and strengthening China’s science and technological power vis-à-vis other nations. These and related statements calling for PRC protection and enforcement authorities to resolve the “chokehold problem” (i.e., the ability of foreign entities to control use and access to technologies critical to China’s development and national security) raise serious concerns for the business community regarding the impartiality of IP authorities in handling matters involving foreigners, including U.S. entities. While on paper China’s IP protection and enforcement mechanisms have improved relative to other foreign markets, in practice, international business associations predict fair, transparent, and non-discriminatory treatment will very likely continue to be denied to U.S. rights holders whose IP ownership and exploitation impede PRC economic development and national security goals.

For detailed information on China’s environment for IPR protection and enforcement, please see the following reports:

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at  


Since their founding over three decades ago, the Shanghai and Shenzhen Exchanges, combined, are ranked the third largest stock market in the world with over USD 11.4 trillion in assets at the end of December 2022. A new exchange, the Beijing Exchange, was launched in November 2021. The Beijing Exchange was set up to provide a platform for small business in the early stages of growth to raise funds on a capital market. In December 2022, the market cap of the Beijing exchange reached USD 29 billion across 135 companies.

China’s bond market has similarly expanded to become the second largest worldwide, totaling approximately USD 21.0 trillion at the end of June 2022. In 2022, PRC financial regulators, including PBOC, SAFE and CSRC issued regulations to facilitate foreign investment into China’s bond market. As of the end of December 2022, foreign holdings of yuan-denominated bonds traded on China’s interbank market stood at approximately USD 485.9 billion, 2.7 percent of the outstanding bonds in custody in China’s interbank market. A total of 1071 foreign institutions held yuan-denominated bonds in China’s interbank market by the end December, of which 526 made direct investment, 784 made the investment via connectivity mechanism, and 239 made the investment via both channels. In August 2022, the CSRC and Ministry of Finance (MOF) signed a Statement of Protocol with the U.S. Public Company Accounting Oversight Board (PCAOB), establishing a framework for the PCAOB to conduct inspections and investigations of PCAOB-registered public accounting firms in China. As of December 2022, 19 sovereign entities and private sector firms, including Hungary, Mercedes Benz, and Deutche Bank issued RMB 84.97 billion yuan, roughly USD 16.7 billion, in 72 “Panda Bonds,” Chinese renminbi (RMB)-denominated debt issued by foreign entities in China in 2022.

China’s private sector can also access credit via bank loans, bond issuance, trust products, and wealth management products. However, most bank credit flows to state-owned firms, largely due to distortions in China’s banking sector that have incentivized lending to state-affiliated entities over their private sector counterparts.  China has been an IMF Article VIII member since 1996 and generally refrains from restrictions on payments and transfers for current international transactions. However, the government has used administrative and preferential policies to encourage credit allocation towards national priorities, such as infrastructure investments and industrial policy.


The PRC’s monetary policy is implemented by the People’s Bank of China (PBOC), the PRC’s central bank. The PBOC has traditionally deployed various policy tools, such as open market operations, reserve requirement ratios, benchmark rates and medium-term lending facilities, to control credit growth. The PBOC has in the past also set quotas on how much banks could lend but officially ended the practice in 1998. As part of its efforts to shift towards a more market-based system, the PBOC announced in 2019 that it would reform its one-year loan prime rate (LPR), which would serve as an anchor reference for other loans. The one-year LPR is based on the interest rate that 18 banks offer to their best customers and serves as the benchmark for rates provided for other loans. In 2020, the PBOC requested financial institutions shift towards use of the one-year LPR for their outstanding floating-rate loan contracts from March to August of that same year. The PBOC viewed the shift as complete by August 2020, when they stopped this practice once 92% of loans were shifted, according to the PBOC.

Despite these measures to move towards more market-based lending, the PRC’s financial regulators still influence the volume and destination of PRC bank loans through “window guidance” – unofficial directives delivered verbally – as well as “structural monetary policies” that guide credit to target entities, such as small and medium sized enterprises. In 2020, the China Banking and Insurance Regulatory Commission (CBIRC) also began issuing rules to regulate online lending by internet companies such as Ant Financial and Tencent, which had previously not been subject to banking regulations. In January 2023, the PBOC and CBIRC announced that the special campaign to “review and rectify” the financial business operations of major internet platform companies, including Ant Financial and Tencent, was “basically complete.” In 2021, PBOC and CBIRC issued circulars emphasizing the need to “encourage financial stability among real estate developers”, and in 2022 PBOC and CBIRC issued additional measures to stabilize the real estate market and bolster lending to developers. On January 5, 2023, PBOC and CBIRC announced the establishment of a dynamic mechanism to lower mortgage rates for first-time home buyers.

The CBIRC oversees the PRC’s 4,599 banking and lending institutions, covering about USD 55 trillion equivalent in total assets as of end-2022, the most recent period for which official data are available. China’s “Big Five” state-owned commercial banks – Agricultural Bank of China, Bank of China, Bank of Communications, China Construction Bank, and Industrial and Commercial Bank of China – dominate the sector and are largely stable, but smaller regional banks have higher rates of non-performing loans and less stable liability structures. PBOC released the “Results of the Central Bank Rating of Financial Institutions (Q4 2021)” in March 2022 showing that 316 banking institutions, comprising 7.2 percent of such institutions received a “fail” rating (high risk) following an industry-wide review in the fourth quarter of 2021. According to the PBOC report, the number of banking financial institutions rated “fail” had decreased for six consecutive quarters. The assessment deemed 289 firms among the 316 that failed – all small and medium sized rural financial institutions – “extremely risky.” The official rate of non-performing loans among China’s banks is relatively low at 1.71 percent as of the end of 2022. However, analysts believe the actual figure may be significantly higher. Bank lending continues to be Chinese companies’ primary channel for obtaining capital (reportedly around 65.3 percent in 2022), although other sources of capital, such as corporate bonds, equity financing, and private equity are quickly expanding in scope, reach, and sophistication in China.

As part of a broad campaign to reduce debt and financial risk, Chinese regulators have implemented measures to rein in the rapid growth of China’s “shadow banking” sector, which includes wealth management and trust products. In December 2020, CBIRC published the first “Shadow Banking Report,” and claimed that the size of China’s shadow banking sector had shrunk sharply since 2017 when China started tightening controls. PBOC estimated in January 2021 that the outstanding balance of China’s shadow banking sector was around RMB 32 trillion at the end of 2020, down from a peak of RMB 100.4 trillion in 2017. Alternatively, Moody’s estimated that China’s shadow banking assets, broadly measured, dropped to RMB 57.8 trillion in the first half of 2021 and the shadow banking-to-GDP ratio dropped to 52.9 percent from 58.3 percent at the end of 2020. Foreign-owned banks can now establish wholly-owned banks and branches in China, however, onerous licensing requirements and industry domination by local players, have limited foreign banks’ market penetration. Foreigners are eligible to open a bank account in China but are required to present a passport and/or Chinese government-issued identification.

Foreign Exchange

While the central bank’s official position is that companies with proper documentation should be able to freely conduct business, in practice, companies have reported challenges and delays in obtaining approvals for foreign currency transactions by sub-national regulatory branches. PRC authorities instituted strict capital control measures in 2016, when China recorded a surge in capital flight. China has since announced that it would gradually reduce those controls, but market analysts expect they would be re-imposed if capital outflows accelerate again. PRC foreign exchange rules cap the maximum amount of RMB individuals are allowed to convert into other currencies at approximately USD 50,000 each year and restrict them from directly transferring RMB abroad without prior approval from the State Administration of Foreign Exchange (SAFE). SAFE has not reduced the USD 50,000 quota, but during periods of higher-than-normal capital outflows, banks are reportedly instructed by SAFE to increase scrutiny over individuals’ requests for foreign currency and to require additional paperwork clarifying the intended use of the funds, with the intent of slowing capital outflows, effectively limiting even these small, personal cash transfers. China’s exchange rate regime is managed within a band that allows the currency to rise or fall by two percent per day from the “reference rate” set each morning.

Remittance Policies

According to China’s FIL, as of January 1, 2020, funds associated with any forms of investment, including profits, capital gains, returns from asset disposal, IPR loyalties, compensation, and liquidation proceeds, may be freely converted into any world currency for remittance. As noted above, U.S. stakeholders occasionally report challenges obtaining approvals to remit funds, typically in times of significant capital outflows. Based on the “2020 Guidance for Foreign Exchange Business under the Current Account” released by SAFE in August, firms do not need any supportive documents or proof that it is under USD 50,000. For remittances over USD 50,000, firms need to submit supportive documents and taxation records. Under Chinese law, FIEs do not need pre-approval to open foreign exchange accounts and are allowed to retain income as foreign exchange or convert it into RMB without quota requirements. The remittance of profits and dividends by FIEs is not subject to time limitations, but FIEs need to submit a series of documents to designated banks for review and approval. The review period is not fixed and is frequently completed within one or two working days of the submission of complete documents. For remittance of interest and principal on private foreign debt, firms must submit an application, a foreign debt agreement, and the notice on repayment of the principal and interest. Banks will then check if the repayment volume is within the repayable principal. There are no specific rules on the remittance of royalties and management fees. Based on guidance for remittance of royalties and management fees, firms shall submit relevant contracts and invoices. The PBOC cut forex reserve requirement ratio twice in May and September 2022 from 9 percent to 6 percent to increase liquidity in forex market as well as easing RMB depreciation pressure. In September 2022, PBOC raised the forex risk reserve requirement ratio for forward forex trading to 20 percent from zero.


China officially has only one sovereign wealth fund (SWF), the China Investment Corporation (CIC), which was launched in 2007 to help diversify China’s foreign exchange reserves. Overall, timely information and updates on CIC and other funds that function like SWFs was difficult to procure. CIC’s annual report published on November 11, 2022, revealed that in 2021, CIC’s overseas investments posted a net return of 14.27 percent in U.S. dollar terms, and the annualized cumulative 10-year net return reached 8.73 percent. However, the report did not disclose what portion of its investments were in the United States or any other geographic details.

CIC has become the largest SWF by total assets by Sovereign Wealth Fund Institute (SWFI). With USD 200 billion in initial registered capital, CIC manages over USD 1.35 trillion in assets as of 2022 and invests on a 10-year time horizon. In 2022, CIC reported its main holdings were in information technology, finance, consumer goods, and life sciences, with additional holdings in manufacturing, telecom services, and raw material sectors. The largest share of holdings (22.8 percent) were in information technology. While CIC affirms they do not have formal government guidance to invest funds consistent with industrial policies or designated projects, CIC is expected to pursue government objectives. CIC has two overseas branches, CIC International (Hong Kong) Co., Ltd. And CIC Representative Office in New York. CIC has since evolved into three subsidiaries:

  • CIC International was established in September 2011 with a mandate to invest in and manage overseas assets.  It conducts public market equity and bond investments, hedge fund, real estate, private equity, and minority investments as a financial investor.
  • CIC Capital was incorporated in January 2015 with a mandate to specialize in making direct investments to enhance CIC’s investments in long-term assets.
  • Central Huijin makes equity investments in China’s state-owned financial institutions.

China also operates other funds that function in part like sovereign wealth funds, including the China’s National Social Security Fund, which earned investment income totaling $16.63 billion in 2021 with the total assets reaching over $446.8 billion by the end of 2021; 9 percent of this was derived from overseas investments. The China-Africa Development Fund (funded solely by the China Development Bank), manages an estimated USD 10 billion in assets (2020). The SAFE Investment Company manages assets estimated at USD 417.8 billion in assets. Finally, China’s state-owned Silk Road Fund, was established in December 2014 with USD 40 billion in assets to foster investment in BRI countries and by the end of 2022, had invested in more than 60 countries and regions with committed investment exceeding $20 billion USD. China’s state-run funds do not report the percentage of assets invested domestically. However, China’s state-run funds follow the voluntary code of good practice known as the Santiago Principles and participate in the IMF-hosted International Working Group on SWFs.

China cited approximately 150,000 wholly-owned SOEs, of which 50,000 are owned by the central government, and the remainder by local or provincial governments.  SOEs account for 30 to 40 percent of total gross domestic product (GDP) and about 20 percent of China’s total employment. Non-financial SOE assets totaled roughly USD 45 trillion (208 trillion RMB). SOEs can be found in all sectors of the economy, from tourism to heavy industries.  State funds are spread throughout the economy and the state may also be the majority or controlling shareholder in an ostensibly private enterprise. China’s leading SOEs benefit from preferential government policies aimed at developing bigger and stronger “national champions.” SOEs enjoy preferential access to essential economic inputs (land, hydrocarbons, finance, telecoms, and electricity) and exercise considerable power in markets like steel and minerals.  SOEs also have long enjoyed preferential access to credit and the ability to issue publicly traded equity and debt.  A comprehensive, published list of all PRC SOEs does not exist.

PRC officials have indicated China intends to utilize OECD guidelines to improve the SOEs independence and professionalism, including relying on Boards of Directors that are free from political influence.  However, analysts believe minor reforms will be ineffective if SOE administration and government policy remain intertwined, and PRC officials make minimal progress in primarily changing the regulation and business conduct of SOEs.  SOEs continue to hold dominant shares in their respective industries, regardless of whether they are strategic, which may further restrain private investment in the economy.  Among central SOEs managed by the State-owned Assets Supervision and Administration Commission (SASAC), senior management positions are mainly filled by senior party members who are often appointed by and report directly to the CCP.  SOE executives often outrank regulators in the CCP rank structure, which minimizes the effectiveness of regulators in implementing reforms.  The lack of management independence and the controlling ownership interest of the state make SOEs de facto arms of the government, subject to government direction and interference.  SOEs are rarely the defendant in legal disputes, and when they are, they almost always prevail.  U.S. companies often complain about the lack of transparency and objectivity in commercial disputes with SOEs.


Since 2013, the PRC government has periodically announced reforms to SOEs that included selling SOE shares to outside investors or a mixed ownership model, in which private companies invest in SOEs and outside managers are hired.  The government has tried these approaches to improve SOE management structures, emphasize the use of financial benchmarks, and gradually infuse private capital into some sectors traditionally monopolized by SOEs like energy, finance, and telecommunications. For instance, State-owned Assets Supervision and Administration Commission (SASAC) officials announced central SOE reform would focus on the advanced manufacturing and technology innovation sectors. As part of these efforts, they claimed SASAC would ensure mergers and acquisitions removed redundancies, stabilize industrial supply chains, withdraw from non-competitive businesses, and streamline management structures. In practice, however, reforms have been gradual, as the PRC government has struggled to implement its SOE reform vision and often preferred to utilize a SOE consolidation approach.  Recently, Xi and other senior leaders have increasingly focused reform efforts on strengthening the role of the state as an investor or owner of capital, instead of the old SOE model in which the state was more directly involved in managing operations.

SASAC issued a circular on November 20, 2020, directing tighter control over central SOEs overseas properties held by individuals on behalf of SOEs. The circular aims to prevent leakage of SOE assets held by individuals and SOE overseas variable interest entities (VIEs). According to the circular, properties held by individuals should be approved by central SOEs and filed with SASAC.

In Northeast China, privatization efforts at provincial and municipal SEOs remains low, as private capital makes cautious decisions in making investment to local debt-ridden and inefficient SOEs. On the other hand, local SOEs prefer to pursue mergers and acquisitions with central SOEs to avoid being accused of losing state assets. There is no available information on whether foreign investors could participate in privatization programs.

The China Chamber of Commerce of Metals, Minerals and Chemicals Importers & Exporters (CCMC) cooperated closely with the OECD in 2015 to develop guidelines designed to align Chinese due diligence standards with international initiatives and legislation. The guidelines apply to all Chinese companies which are extracting and/or engaged at any point in the supply chain of minerals. Although China has taken steps since 2015 to address concerns over opaque mining contracts and violations of local laws and environmental pollution standards, many of the guidelines remain voluntary or largely unenforced.

The PRC has a large private security industry and there is a high usage of PRC private security companies by the government, SOEs, and private companies. The PRC is a signatory and one of the original ratifiers of the Montreux Document on Private Military and Security Companies. The PRC government is not a member of IcoCA, however some PRC civil society organizations, academic institutes, and private companies are members of IcoCA.


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The PRC adopted a national climate strategy in 2021, known as the “1+N” package of climate policies, which provides a roadmap to peak carbon emissions before 2030 and reach carbon neutrality before 2060, in fulfillment of the pledges announced by President Xi Jinping in September 2020.  The PRC government has not clarified officially whether the 2060 target applies to all greenhouse gases (GHGs) and all sources, or just to carbon dioxide (CO2) from fossil fuels.  The main policies in this “1+N” framework include the Working Guidance for Carbon Dioxide Peaking and Carbon Neutrality in Full and Faithful Implementation of the New Development Philosophy published jointly by the Central Committee of the Chinese Communist Party (CCP) and the State Council on October 24 and the Action Plan for Carbon Dioxide Peaking before 2030 released by the State Council on October 26.  The Working Guidance is the central “1” plan, while the Action Plan for Carbon Dioxide Peaking is the first “N” document in a collection of plans for important regions and sectors.  Additional “N” plans issued as of February 2022 include those for the green industry, public institutions, digital infrastructure, green consumption, state-owned enterprises, and low-carbon energy.

China does not have a national system for natural capital accounting. Some pilot programs exist at the subnational level. For instance, Shenzhen launched a Gross Ecosystem Product (GEP) accounting system in 2020, with a claimed GEP reaching approximately $20 billion USD (136 billion RMB) in 2021. Also, a few local governments in Zhejiang Province began piloting statistical accounts for the value of natural capital starting in 2018.  Zhejiang has also piloted the development of an indicator for a “gross ecological product” indicator, which would measure the economic value of ecosystem services.  The creation of a “green” GDP indicator that would include measures of biodiversity and/or ecosystem health has been discussed for decades among PRC academics and in policy circles.  The National Bureau of Statistics (NBS) and former State Environmental Protection Agency (SEPA) in 2006 published official statistics for China’s green GDP in 2004, but the report was discontinued.

Specific timelines and emissions levels for CO2 peaking by the private sector, different industries, and local governments have not yet been published.  Some major SOEs and private companies have voluntarily announced their own carbon peaking or carbon neutrality pledges.  For instance, China Baowu Steel Group announced plans to peak its CO2 emissions by 2023, and the tech giant Tencent set a goal of becoming carbon neutral by 2030.

There have been numerous central government-level regulatory incentives aimed at various environmental goals over time. For example, since 2006, the central government has offered subsidies to promote the expansion of renewable power. As the costs of wind and solar power have fallen, so have subsidy amounts. Subsidies were phased out for new utility-scale onshore wind and solar PV projects starting in 2021, and for new offshore wind projects starting in 2022. Additional subsidies for renewable power are often provided by provincial, city-level, and even urban district-level authorities.

To support development of the new energy vehicle (NEV) industry, the Ministry of Industry and Information Technology (MIIT) introduced NEV purchase subsidies in 2009, handing more than USD 23 million to manufacturers through 2020 per PRC government sources. These subsidies compensated manufacturers for reducing the retail prices of NEVs, which contacts said were instrumental to making PRC-manufactured NEVs affordable. While the PRC began reducing subsidies in 2018 and planned to phase them out entirely by 2020, the government reversed course and extended some subsidies through at least 2022 to sustain consumer demand. Subsidies remain only for vehicles with ranges of over 300 km and those using experimental hydrogen fuel cell or battery-swapping technologies. PRC authorities also extended a policy exempting NEVs from the 10 percent motor vehicle purchase tax through the end of 2022, which further lowers the cost to consumers. Subsidies greatly increased demand for NEVs in the PRC market, driving key supply chains to the PRC and cementing lower consumer prices, according to industry analysts.

China’s national carbon market launched trading in July 2021. The first phase of the market covers over 2,162 thermal power generators (coal and gas), with combined annual CO2 emissions of around 4.5 billion tons.  Regulators claim the market will expand to include other high-emission industries over the next four to five years.

The MOFCOM, MEE, and the MIIT jointly issued the “Guidelines for Enterprise Green Procurement (Trial)” to guide companies to adopt green procurement guidelines.  Enterprises are advised to avoid the “blacklist” of purchased products, including “high pollution, high environmental risk” products listed in the “Comprehensive Directory of Environmental Protection” formulated by the Ministry of Environmental Protection.  According to various estimates, government procurement of “green” products in 2020 reached USD 12.7 billion.

The Ministry of Finance (MOF) and the MEE have released 22 government lists listing environmental labeling products and one list of environmental labeling government procurement items. The products have grown from 856 products in the first issue to one million, and from 14 original product categories to more than 90 categories in 2020.  China Environmental Labelling signifies that the product is not only is high-quality but also meets specific environmental requirements covering the entire cycle from production, usage, to disposal.

China ranked 25th on the Information Technology and Innovation Foundation’s (ITIF) Global Energy Innovation Index for 2021, an improvement from 2016. On the MIT Technology Review’s Green Future Index tracking progress towards a low-carbon future, China ranked 45th.

Since 2012, China has undergone a large-scale anti-corruption campaign, with investigations reaching into all sectors of the government, military, and economy. CCP General Secretary Xi labeled endemic corruption an “existential threat” to the very survival of the Party.  In 2018, the CCP restructured its Central Commission for Discipline Inspection (CCDI) to include a state organ, calling the new body the National Supervisory Commission-Central Commission for Discipline Inspection (NSC-CCDI), which expanded the CCDI’s investigatory scope to go beyond party officials to include government officials and individuals who perform “official duties,” such as managers of state-owned enterprises, public hospitals, and universities. From 2012 to 2022, the NSC-CCDI claimed it investigated roughly four million cases, with over 410,000 punished since 2017. Since 2017, the PRC’s overseas fugitive-hunting campaign, called “Operation Skynet,” has led to the capture of alleged fugitives suspected of corruption who were living in other countries, including CCP members and government employees. In most cases, the PRC did not notify host countries of these operations. Since 2021, the government reported apprehending more than 7,000 alleged fugitives and recovering approximately USD 5.1 billion through this program.

In March 2021, the CCP Amendment 11 to the Criminal Law, which increased the maximum punishment for acts of corruption committed by private entities to life imprisonment, from the previous maximum of 15-year imprisonment, took effect. In June 2020 the CCP passed a law on Administrative Discipline for Public Officials, continuing efforts to strengthen supervision over individuals working in the public sector. The law enumerates targeted illicit activities such as bribery and misuse of public funds or assets for personal gain. Anecdotal information suggests anti-corruption measures are applied inconsistently and discretionarily.  For example, to fight commercial corruption in the medical sector, the health authorities issued “blacklists” of firms and agents involved in commercial bribery, including several foreign companies. While central government leadership has welcomed increased public participation in reporting suspected corruption at lower levels, direct criticism of central leadership or policies remains off-limits and is seen as an existential threat to China’s political and social stability. China ratified the United Nations Convention against Corruption in 2005 and participates in the Asia-Pacific Economic Cooperation (APEC) and OECD anti-corruption initiatives. China has not signed the OECD Convention on Combating Bribery, although PRC officials have expressed interest in participating in the OECD Working Group on Bribery as an observer. Corruption Investigations are led by government entities, and civil society has a limited scope in investigating corruption beyond reporting suspected corruption to central authorities.

Liaoning established a “Business Environment Supervision Action Plan” to inspect government discipline and provide a mechanism for the public to report corruption and misbehaviors through a “government service platform” designed to reduce corruption and “optimize” the business environment. In 2022, Liaoning reported handling 6,228 cases and recovering approximately USD 1.49 billion in arrears by government entities through this program.

Some CCDI cases that received considerable attention in 2022 included probes into CEOs and managers of three state-owned semiconductor investment funds, including Tsinghua Unigroup and Sino IC Capital which was responsible for managing the China Integrated Circuit Industry Investment Fund (National IC Fund) or “IC Fund.”  Media reports indicated these arrests were related to senior PRC officials’ frustration over alleged IC Fund mismanagement and the domestic semiconductor industry’s inability to indigenize the PRC’s high-end semiconductor supply chain.

Separately, the incumbent Minister of Industry and Information Technology (MIIT) Xiao Yaqing, was expelled from the CCP and removed from his post on December 18, 2022, following an investigation by the CCDI and the State Supervision Commission.  Xiao was suspected of “violating party discipline and state law.”  Xiao took the post as MIIT Minister in August 2020 and had been serving as the ministry’s party secretary and as a full member of the CCP Central Committee.


The following government organization receives public reports of corruption:
Anti-Corruption Reporting Center of the CCP Central Commission for Discipline Inspection and the National Supervisory Commission, Telephone Number:  +86 10 12388.

Foreign companies operating in China face a growing risk of anti-competitive practices and exit bans, which can be politically motivated. PRC authorities have broad authority to prohibit travelers from leaving China and have imposed “exit bans” to compel U.S. citizens to resolve business disputes, force settlement of court orders, or facilitate PRC investigations. U.S. citizens, including children, not directly involved in legal proceedings or wrongdoing have also been subject to lengthy exit bans to compel family members or colleagues to cooperate with Chinese courts or investigations. Exit bans are often issued without notification to the foreign citizen or without clear legal recourse to appeal the exit ban decision. A 2020 independent report presented evidence that since 2018, more than 570,000 Uyghurs were subjected to forced labor picking cotton. There was also reporting that Xinjiang’s polysilicon and solar panel industries are connected to forced labor. In 2021, PRC citizens, with the encouragement of the PRC government, boycotted companies that put out statements on social media affirming they do not use Xinjiang cotton in their supply chain. Some landlords forced companies to close retail outlets during this boycott due to fears of being associated with boycotted companies. The ongoing PRC crackdown on virtually all opposition voices in Hong Kong and continued attempts by PRC organs to intimidate Hong Kong’s judges threatens the judicial independence of Hong Kong’s courts – a fundamental pillar for Hong Kong’s status as an international hub for investment into and out of China.  Apart from Hong Kong, the PRC government has also previously encouraged protests or boycotts of products from countries like the United States, the Republic of Korea (ROK), Japan, Norway, Canada, and the Philippines, in retaliation for unrelated policy decisions such as the boycott campaigns against Korean retailer Lotte in 2016 and 2017 in response to the ROK government’s decision to deploy the Terminal High Altitude Area Defense (THAAD); and the PRC’s retaliation against Canadian companies and citizens for Canada’s arrest of Huawei’s Chief Financial Officer Meng Wanzhou.

For U.S. companies operating in China, finding, developing, and retaining domestic talent at the management and skilled technical staff levels remains challenging for foreign firms, especially as labor costs, including salaries and inputs continue to rise. For the majority of 2022, COVID-19 control and related travel measures made it difficult to recruit or retain foreign staff. Although the PRC lifted most of these measures by January 2023, foreign companies continue to complain of difficulty navigating China’s labor and social insurance laws, including local implementation guidelines. Compounding the complexity, due to ineffective enforcement of labor laws and high mandatory social insurance contributions, many PRC domestic employers and employees will not sign formal employment contracts, putting foreign firms at a disadvantage. The All-China Federation of Trade Unions (ACFTU) is the only union recognized under PRC law.  Establishing independent trade unions is illegal.  The law allows for “collective bargaining,” but in practice, focuses solely on collective wage negotiations.  The Trade Union Law gives the ACFTU, a CCP organ chaired by a Politburo member, control over all union organizations and activities, including enterprise-level unions.  ACFTU enterprise unions require employers to pay mandatory fees, often through the local tax bureau, equaling a negotiated minimum of 0.5 percent to a standard two percent of total payroll.  While labor laws do not protect the right to strike, “spontaneous” protests and work stoppages occur.  Official forums for mediation, arbitration, and other mechanisms of alternative dispute resolution often are ineffective in resolving labor disputes.  Even when an arbitration award or legal judgment is obtained, getting local authorities to enforce judgments is problematic.

The PRC has not ratified the International Labor Organization (ILO) conventions on freedom of association, or collective bargaining but it has ratified conventions prohibiting child labor, employment discrimination, and forced labor. Nevertheless, Uyghurs and members of other minority groups are subjected to forced labor in Xinjiang and throughout China via PRC government-facilitated labor transfer programs.

U.S. Customs and Border Protection issued several withhold release orders (WROs) pursuant to section 307 of the Tariff Act of 1930 based on information that reasonably indicates the use of detainee or prison labor and situations of forced labor in Xinjiang, including a region-wide WRO on cotton and tomato products from Xinjiang, on January 13, 2021. The scope of this WRO includes cotton and tomatoes and downstream products that incorporate these commodities as inputs.

In July 2021 the U.S government updated its business advisory on risks for businesses and individuals with exposure to entities engaged in forced labor and other human rights abuses linked to Xinjiang. This update highlighted the extent of the PRC’s state-sponsored forced labor and surveillance taking place amid its ongoing genocide and crimes against humanity in Xinjiang. The Advisory stresses that businesses and individuals that do not exit supply chains, ventures, and/or investments connected to Xinjiang could run a high risk of violating U.S. law.

In December 2021, President Biden signed into law the Uyghur Forced Labor Prevention Act (UFLPA), which, among other things, establishes a rebuttable presumption that the importation of goods from Xinjiang is prohibited under section 307 of the Tariff Act of 1930.

On June 13, 2022, U.S. Customs and Border Protection (CBP) released importer guidance to assist the trade community in preparing for the implementation of the UFLPA rebuttable presumption.

On June 17, 2022, the Forced Labor Enforcement Task Force submitted to Congress its strategy to support the enforcement of Section 307 of the Tariff Act of 1930, as amended (19 U.S.C. § 1307) to prevent the importation into the United States of goods mined, produced, or manufactured wholly or in part with forced labor in the People’s Republic of China.

The strategy included: a comprehensive assessment of the risk of importing goods mined, produced, or manufactured, wholly or in part, with forced labor in the PRC; an evaluation and description of forced-labor schemes, UFLPA-required lists (including the UFLPA Entity List), UFLPA-required plans, and high priority sectors for enforcement; recommendations for efforts, initiatives, tools, and technologies to accurately identify and trace affected goods; a description of how CBP plans to enhance its use of legal authorities and tools to prevent entry of goods at U.S. ports in violation of 19 U.S.C. § 1307; a description of additional resources necessary to ensure no goods made with forced labor enter U.S. ports; guidance to importers; and a plan to coordinate and collaborate with appropriate NGOs and private-sector entities.

On June 21, 2022, CBP began applying the rebuttable presumption that goods produced wholly or in part in the region or by entities identified in the enforcement strategy are not allowed to enter the United States. An importer may request an exception to the rebuttable presumption from CBP. This will require providing clear and convincing evidence that its imported merchandise was not mined, produced, or manufactured wholly or in part by merchandise was not mined, produced, or manufactured wholly or in part by forced labor.

In the aftermath of the PRC crackdown on Tiananmen Square demonstrations in 1989, the United States suspended Overseas Private Investment Corporation (OPIC) programs in China. OPIC’s successor, the U.S. International Development Finance Corporation, currently does not operate in China.  The Multilateral Investment Guarantee Agency, an organization affiliated with the World Bank, provides political risk insurance for investors in China. Foreign commercial insurance providers for political risk insurance include China’s People Insurance Company.

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country GDP ($M USD) 2021 $17,817,600 2021 $17,730,000
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2021 $92,650 2021 $118,186 BEA data available at
Host country’s FDI in the U.S. ($M USD, stock positions) 2021 $77,172 2021 $38,249 BEA data available at
Total inbound stock of FDI as % host GDP 2021 $14.7% 2021 11.9% UNCTAD data available at 

* Source for Host Country Data: National Bureau of Statistics, Statistical Bulletin of FDI in China

Table 3: Sources and Destination of FDI
Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward $2,620,770 100% Total Outward $2,785,150 100%
China, P.R., Hong Kong $1,433,060 54.7% China, P.C., Hong Kong $1,549,658 55.6%
British Virgin Islands $180,060 6.9% British Virgin Islands $447,477 16.1%
Japan $122,990 4.7% Cayman Islands $229,525 8.2%
Singapore $120,840 4.6% United States $77,172 2.8%
United States $92,650 3.5% Singapore $67,202 2.4%
“0” reflects amounts rounded to +/- USD 500,000.

U.S.  Embassy Beijing Economic Section
55 Anjialou Road, Chaoyang District, Beijing, P.R.  China
+86 10 8531 3000

On This Page

  2. 1. Openness To, and Restrictions Upon, Foreign Investment
  3. 2. Bilateral Investment and Taxation Treaties
  4. 3. Legal Regime
      1. FDI Requirements for Investment Approvals  
      1. ICSID Convention and New York Convention  
      2. Investor-State Dispute Settlement (ISDS)
      3. International Commercial Arbitration and Foreign Courts  
  5. 4. Industrial Policies
      1. Performance Requirements
      2. Data Requirements
  6. 5. Protection of Property Rights
  7. 6. Financial Sector
      1. Foreign Exchange
      2. Remittance Policies
  8. 7. State-Owned Enterprises
  9. 8. Responsible Business Conduct (RBC)
  10. 9. Corruption
  11. 10. Political and Security Environment
  12. 11. Labor Policies and Practices
  13. 12. U.S. International Development Finance Corporation (DFC), and Other Investment Insurance or Development Finance Programs
  14. 13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
  15. 14. Contact Information
2023 Investment Climate Statements: China
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The Lessons of 1989: Freedom and Our Future