From BITs to BRI: China’s Evolving Approach to International Investment

• In Event: China in the Global Economy: Authoritarian Politics and Economic Liberalization

Abstract

The intersection of national security and international investment, especially involving outbound capital flows from China, has become a major concern for many countries. Yet little is known about how China itself has balanced investment and security interests while engaging with the international investment regime over the past four decades. Using an original dataset of over 1,100 full-text bilateral investment treaties (BITs), this paper analyzes why and when security exception clauses have been included in Chinese BITs. We first establish that there has been significant variation in the inclusion of these clauses across treaty partners and over time. Although domestic concerns about inbound investment initially motivated China to negotiate frequently for security exceptions to weaken foreign investor protections when it was a net recipient of capital, this practice has become more heterogenous as China’s embeddedness in the international investment regime deepened and it became a net capital exporter. We examine the domestic and international factors that affect the likelihood of security exception clauses being adopted in Chinese BITs, thereby unpacking the politics behind the evolution of China’s engagement with the international investment regime—from cautious adopter to active participant to emerging institutional innovator.

Authors

• Wendy Leutert, Indiana University

• Zachary Haver, The George Washington University