Foreign investment in China’s infrastructure: finding the balance between efficiency and development, or, How to attract foreign investment to infrastructure projects without selling the country’s soul to the foreign devils
University of British Columbia
Master of Laws - LLM
Chinese official plans for the country include more and better infrastructure for which it cannot afford to pay the total cost. China expects foreign investors to provide 20% of the funds needed for this purpose. However, the government and foreign investors do not always have compatible goals or expectations and it appears that actual investment in infrastructure projects will fall short of what is needed. The paper identifies a tension that exists between China's 'development' perspective and the foreign investor's 'efficiency' perspective and attempts to describe what actually happens in the process surrounding the 'making' of an infrastructure project. It also suggests that unless this tension is resolved, China's infrastructure needs will not be met and its economic growth may suffer. The paper distills the nature and characteristics of each perspective from a review in Chapter I of a number of theories concerning the free market, law and economics, and economic development. Using data gleaned from locally accessible printed materials, online databases, and other media, the paper presents case studies of a number of infrastructure projects in Chapter II. In Chapter in, the efficiency and development perspectives are tested in the case study examples by examining three aspects o f infrastructure projects of concern to both China and foreign investors: rate of return, control, and risk. The paper goes on to identify where and how a balance was found, or not found, between the perspectives, leading to the success or failure of the project. Finally, in Chapter IV, the paper summarizes some of the primary obstacles to foreign investment in infrastructure as well as some of the techniques that have been successful in overcoming them. It also advances the proposition that the tension between efficiency and development evidences a fundamental conflict of norms that will not be resolved until the two sides are able to reach some mutuality of understanding combined with a commonality o f purpose, something that will require efficiency-driven foreign investors to reassess not only their goals and expectations, but also their role in the global community.
Law, Peter A. Allard School of