ABSTRACT
In a typical report on the investment environment of China, as the one cited by Stanley Lubman (2004) in a report prepared by the European Commission, China is not yet a genuine market economy because of its ‘inconsistencies among laws, weak and inconsistent or arbitrary enforcement and the weak capacity of the judicial system’. The weak capacity of the judicial system in turn has produced higher investment risks for investors. Another frequently cited source of investment risks is the strong yet arbitrary and often negative state intervention in the market, which is considered as the basis for corruption. While many of these complaints could be well founded it is unclear how exactly these elements contribute to the ‘investment risks’ in China, and how such risks work against investors from abroad.
