The siren call of China continues attracting MNEs. Still, investors question how an opaque, single-party political system and a murky legal system can protect their rights. Some believe that external institutions will improve transparency. China’s 2001 ascension to the WTO, for example , required it to accept rules on all sorts of business matters, including tariffs, subsides, and intellectual property. China has steadily amended its legal codes to comply with WTO standards. Today, the problem is not a shortage of regulations. The problem is China’s sluggish enforcement.
Despite intimidating political difficulties and confusing legal questions, foreign investors head to China. Perhaps driven by optimism, perhaps by confidence in continued progress, or perhaps by desperation to ride this megatrend, companies leave the sanctuary of predictable markets for the unique ways of the Middle Kingdom. And, once they cross the modern-day Rubicon, they face the daunting task of interpreting China’s political and legal systems.