Asia-Pacific FDI Forum II

As recounted by Premier Li Keqiang in a speech at the World Economic Forum in 2015, China was experiencing a painful and treacherous economic transition from being a state-led manufacturing economy to a service-based economy. At this time, new strategies were also being discussed to fuel China’s stalled economic reforms and development goals (as articulated in China’s 13th Five-Year-Plan (2016-2020)). For China and domestic investors, the investment pool was shrinking largely, especially when compared with its very high savings rate. According to the World Bank’s Ease of Doing Business Index measuring business-friendly regulations, China was ranked 84 in 2015, after Ukraine at rank 83. It was therefore important for China to realign its investment rules and policies with its major economic partners and within the greater APAC region so as to nudge this scale in their favour.

These new opportunities bring with them risks, and balancing opportunities against risk has been a challenging task for policy makers, researchers, and the civil society. These stakeholders are working towards developing effective and innovative governance structures which will help their countries in navigating the rough seas of FDI and economic welfare and growth, to reach an island where sustainable and inclusive growth prevails.

The Asia-Pacific FDI Forum II, took place in 2016. It was structured around three tracks of China and emerging investment policy and strategy.

The Bilateral Prong: In recent years, China (a country which has historically preferred to deal bilaterally with foreign nations), possibly to advance its interests and gain more influence in the process has entered into a series of bilateral talks with its high-income trading partners. China concluded bilateral deals with certain strategic partners e.g. ASEAN (2009), Canada (2012), and Australia (2015). Furthermore, the US-China BIT, which governed a more complex economic relationship between the world’s two largest economies, was launched in 2008. Additionally, the EU and China investment treaty (launched in 2013 at the 16th EU-China Summit) encouraged further liberalization of the Chinese economy and contributed towards China’s propaganda of gaining greater economic influence globally.
The Regional Prong: China has actively participated in shaping the economic architecture of the APAC region. Spurred by regional economic integration in the West (EU, NAFTA, MERCOSUR, Pacific Alliance) and frustrated by the deadlock at the WTO, countries in the APAC region have leaned towards harmonization and modernization of their foreign investment rules. To fulfil the Asia-Pacific dream touted by President Xi Jinping, China has, since 2006, been promoting an Asia-Pacific trade pact, Free Trade Area of Asia Pacific (FTAAP), the Regional Comprehensive Economic Partnership (RCEP) and the Trans Pacific Partnership (TPP) as pathways towards regional harmonization. In 2014, a desired level of harmonization was achieved in East Asia as the China-Japan-Korea Trilateral Investment Agreement was entered into force. Additionally, while the erstwhile TPP (now the Comprehensive and Progressive Agreement for Trans-Pacific Partnership), did not contain China as a Member State, it is considered as an important development due to its complex and significant impact on the region and its investment governance regime.
The Global Prong: Aimed at strengthening its ‘Go Global’ policy by opening up new markets and increasing the value of cross-border business, China has garnered some serious attention through its introduction of the One Belt One Road (OBOR) Initiative in 2013. The OBOR followed China’s G20 Presidency in 2016, where a multilateral consensus was reached in connection with Global Investment Policymaking, having a sharp focus on inclusive growth and sustainable development.

The Asia-Pacific FDI Forum II’s overarching topic was whether the aforementioned three emerging tracks of China and its investment policy and strategy are complementary or in competition. This discussion also allowed participants to understand China and its approach with respect to Investor-State Dispute Settlement (ISDS), its experience with incorporating historical investment treaty concepts such as customary international law, and its journey from being a net capital importer to an active capital exporter as reflected in its treaty practice.