Fake law in China

ARTICLE: "Concerns About China Arbitration Rise," by Ashby Jones and Andrew Batson, Wall Street Journal, 9 May 2008, p. B1.

Chinese ape rising global use of private arbitrators to settle business disputes (just like in family law in U.S.), but seem to deliver a fairly biased stream of judgments in favor of Chinese companies vs. foreign ones.

Instead of reducing biz cost and uncertaintly, the longer they pursue this line, the more foreign companies will reconsider the real "costs" of doing business there.

You can use market power to force a localized business rule set, but the longer you do it, the less attractive you make yourself in a network trade world, referring to the two-thirds of globalization's trade that's controlled by multinationals (with half being true network, or intra-corporate trade). By that I mean you just seem like a riskier node.

The ways companies hedge on this typically is called the "China plus one" strategy of locating X facilities in China but always backing one up elsewhere in SE Asia (increasingly Vietnam). The more China pretends it will have its own way of conducting business, the more hedging we'll see by multinationals.

Comments

[stuart abrams]

China is actually becoming a very litigious society, which I find encouraging as I don't usually think of litigiousness and "fascism" as getting along too well. Recently attended a program on Chinese intellectual property law, and the statistics as to the explosion in the number of disputes is remarkable. Significantly, most of these disputes are Chinese v. Chinese, not Chinese v. Foreigner. Seems to me that this will inevitably generate a more regularized system, which will ultimately apply to both Chinese and foreigners. Nevertheless, there is an inevitabilty of some "home court advantage" in any legal system - try being a Chinese company appearing before a jury in rural Ohio.

[Dan Harris]

One big problem with your argument is that the "plus one" countries like Vietnam and Bangladesh are far far worse than China on this score.