Doors Wide Shut? An Update on FDI Regulations in China
The fears of a rise in economic nationalism in China have been fueled by a number of recent moves, such as changes in the law on indigenous innovation or the enactment of a national security review (NSR) regulation for M&As by foreign enterprises. The objective of the current paper is twofold: First is to provide an update on the investment environment in China in order to determine whether or not these provisions reflect a move in the direction of more protectionism, and second is to suggest ways for European countries to level the playing field for their firms wishing to invest in China.
The general message is that no clear-cut trend can be identified. While it cannot be said that the regulatory environment is increasingly rigid, there has not lately been any clear loosening of restrictiveness either.
The recently promulgated changes to the catalogue on foreign investment guidance point to further opening, in particular with fewer restricted categories. However, this positive change is counterbalanced by the persistence of ownership restrictions in particular. Similarly, although the Chinese government has backtracked on its decision to connect indigenous innovation policy and government procurement, the Chinese public procurement market is still heavily restricted for foreign investors. Lastly, the implementation of the merger review under the anti-monopoly law suggests that foreign firms are to some extent being discriminated against even if the recently enacted NSR procedure should not bring major changes to the existing regulatory setting.
More generally, with an important level of discretion left in the hands of Chinese authorities at all levels of responsibility, the business environment remains complex for foreign investors. A major problem in the Chinese case relates to the lack of transparency and of stability in the regulatory environment. The vagueness of some provisions (economic security is a case in point) and the lack of precision in the responsibilities assumed by various levels of government (be they central or provincial, as in the case of the indigenous innovation catalogues) generate an opaque and uncertain business environment. Retroactive application of some regulations is also not uncommon, further increasing the lack of predictability in the regulatory environment.
The challenge for China's partners is to find the best way, beyond regulatory reforms, to level the playing field for their firms operating in China. This paper calls for opening negotiations on a bilateral investment treaty between China and the EU. The treaty needs to be ambitious and comprehensive, covering both pre and post-establishment issues (market access as well as investment protection in particular). One major advantage of a BIT negotiation is that it would be based on a global approach to FDI-related issues, thus allowing trade-offs between various objectives.
Available in:
Regions and themes
ISBN / ISSN
Share
Download the full analysis
This page contains only a summary of our work. If you would like to have access to all the information from our research on the subject, you can download the full version in PDF format.
Doors Wide Shut? An Update on FDI Regulations in China
Related centers and programs
Discover our other research centers and programs
Center for Asian Studies
Asia is a nerve center for multiple global economic, political and security challenges. The Center for Asian Studies provides documented expertise and a platform for discussion on Asian issues to accompany decision makers and explain and contextualize developments in the region for the sake of a larger public dialogue.
The Center's research is organized along two major axes: relations between Asia's major powers and the rest of the world; and internal economic and social dynamics of Asian countries. The Center's research focuses primarily on China, Japan, India, Taiwan and the Indo-Pacific, but also covers Southeast Asia, the Korean peninsula and the Pacific Islands.
The Centre for Asian Studies maintains close institutional links with counterpart research institutes in Europe and Asia, and its researchers regularly carry out fieldwork in the region.
The Center organizes closed-door roundtables, expert-level seminars and a number of public events, including an Annual Conference, that welcome experts from Asia, Europe and the United States. The work of Center’s researchers, as well as that of their partners, is regularly published in the Center’s electronic journal Asie.Visions.
Find out more
Discover all our analyses
Emmanuel Macron in Japan and South Korea: A Historic Opportunity for Euro-Asian Rapprochement
President Emmanuel Macron is touring Japan and South Korea at a time when the interests of these three countries have never been more aligned, and more broadly between Europe and East Asian democracies.
Afghanistan-Pakistan: The Overlooked War at the Margins of the Middle East Conflict
Pakistan has historically maintained the closest ties to the Taliban movement and initially viewed its return to power in Afghanistan in the summer of 2021 with considerable optimism. The bilateral relationship has since deteriorated, and the two neighbors have been caught in a cycle of escalation since last fall. In October 2025, Pakistan launched its first airstrikes on Kabul. For three weeks in February–March 2026, Afghanistan intensified ground assaults on the Pakistani side of the border as well as drone attacks on Islamabad and Rawalpindi. Pakistan, for its part, has intensified airstrikes on Afghan border areas, as well as on Kabul and Kandahar. Given the dynamics at play at the bilateral and regional levels, the prospects for a sustained return to stability appear limited.
European Union-India: Lasting Rapprochement or Partnership of Convenience?
The partnership between the European Union (EU) and India has long been limited to economic exchanges. Its political dimension has gradually developed, culminating in its elevation to the status of a “strategic partnership” in 2004. However, the failure of negotiations for a free-trade agreement in 2013 slowed this momentum. Since the early 2020s, in an uncertain geopolitical context, bilateral rapprochement has gained new momentum.
Japan’s Takaichi Landslide: A New Face of Power
Prime Minister Sanae Takaichi has turned her exceptional popularity into a historic political victory. The snap elections of February 8 delivered an overwhelming majority for the Liberal Democratic Party (LDP), driven by strong support from young voters, drawn to her iconoclastic and dynamic image, and from conservative voters reassured by her vision of national assertiveness. This popularity lays the foundation for an ambitious strategy on both the domestic and international fronts.