'Invisible' laws hurt foreign investors
FOREIGN investors in China are still vulnerable to costly mistakes, even when they are well-versed in the law, because many policies are either incomplete or unpublished, according to Hong Kong Polytechnic law lecturer Donald Lewis.
''Everything from the negotiations to contracts is subject to government control. Laws are invisible with internal regulations and it is still incomplete - it is piecemeal legislation,'' he told the China Law and Practice seminar on Chinese investment law yesterday.
He said this legislation was only 15 years old in China and, while great progress had been made in areas like taxation and equity joint ventures, there was still a long way to go before it could be called a stable investment environment.
''Even where to go for which approval isn't clear,'' Mr Lewis said.
In separate incidents recently, two of his company's clients had spent months negotiating deals, only to find they still needed central government approval. The projects had to be put on hold for at least another six to nine months.
In China, internal regulations which govern both investment and trade are not published - a tradition which is unlikely to change in the near future.
''The memorandum of understanding between China and the United States was signed in 1992. China has still not published all the points,'' Mr Lewis said.
He advised firms to opt for co-operatives rather than equity joint ventures. Chinese partners often tried to downgrade investors' equity by using laws to their advantage. But in co-operative ventures, profit distribution could be determined by contracts.
