Research On Legal Problems Of Foreign-invested Enterprises In China, A Non-normal Divestment

Since the global financial crisis resulted from the U.S. subprime crisis in the second half of2008, especially with the impact of domestic factors such as increase of Chinese labor cost,price increase of factors of production, the increasingly fierce market competition, andthe adverse impact of Japanese government’s foreign policy in the past two years, it isgetting increasingly serious that foreign investors as shareholders of foreign-investedcompanies carry out liquidation without following statutory procedures required byrelevant Chinese laws and by way of abnormal divestment to avoid arrear payment of statetaxes and labor wages and to evade breach liability and debt of creditors in China, whichcauses serious economic loss to Chinese stakeholders and certain negative impact tobilateral economic and trade exchange and local social stability. It has become a hot issuein economic law and legal affairs fields to understand the legal issues related to abnormaldivestment of foreign-invested companies and to prevent the adverse impact of divestmenton China’s economic development.From the perspective of legal regulation of foreign investment in China, the paper adoptseconomic law theory and the methodology of empirical analysis, elaborates foreigninvestment related theories and legal regulation on foreign investment in China throughcase study, undertakes in-depth analysis on domestic, foreign political, economic anddiplomatic backgrounds of abnormal divestment of foreign-invested companies in recentyears as well as forms and reasons of abnormal divestment and relevant legal issuesbrought to our economy and society due to abnormal divestment. On such basis, the paperfurther elaborates corresponding legal responsibilities foreign investors shall take duringabnormal divestment, and legal remedy approaches and other issues to be established byrelevant Chinese stakeholder, makes proposal on establishing a monitoring andpre-warning system on divestment so as to prevent various legal risks exposed toforeign-invested companies due to abnormal divestment of foreign investors.This paper consists of seven chapters, and the main content of which is:Chapter One, introduces mainly the background and significance of the research. Discussesthe theoretical background of abnormal divestment in foreign-invested companies, analyzes the current achievement and status of research on divestment, explains the contentand methods of research, as well as innovations and shortcomings.Chapter Two, introduces current status of investment, operation and divestment offoreign-invested companies and studies from domestic and overseas perspectives thebehavior of abnormal divestment.Chapter Three, reviews the status, types and forms of divestment and abnormal divestmentand analyzes the international and domestic reasons of divestment.Chapter Four, analyzes legal liabilities foreign-invested companies shall take duringabnormal divestment and the approaches of pursue legal liability.Chapter Five, analyzes legal liabilities of foreign-invested companies during abnormaldivestment and practical obstacles of pursue legal liability.Chapter Six, introduces legal strategies preventing abnormal divestment of wholly-ownedforeign companies. Further studies the abnormal divestment phenomenon offoreign-invested companies and makes effective legal suggestions on optimizing legalenvironment of multinational investment, improving taxation and liquidation laws andjudicial proceedings related to divestment, and the significance of which in deepeningunderstanding of the phenomenon, reducing the occurrence of abnormal divestment inforeign-invested companies and better playing the role of foreign-invested companies inpromoting China’s economic and social development.Chapter Seven, conclusions. The research is made on the basis of abnormal divestment offoreign-invested companies in China, mainly illegal divestment, which helps toadvantageously analyze the current status of foreign investment in China, predict followingflow of existing foreign investment hence to timely adjustment China’s foreign investmentpolicy, and also provides theoretical basis for improving investment environment and thusimproving regulation on foreign investment companies in China.