‘China’s Disequilibrium’ in ISDS: an interplay of China’s trade-offs and domestic institutions to investment treaty policy

Abstract This article explores China’s limited engagement in Investor-State Dispute Settlment (ISDS) despite its significant foreign investment inflows, termed “China’s Disequilibrium”. Despite having liberal ISDS provisions in its Bilateral Investment Treaties(BITs), China has faced only nine claims and has never lost a case. Using a political-economic framework, the article examines domestic factors influencing China's stance on ISDS, highlighting its shift from ideological resistance to acceptance. The paper argues that China’s ambivalent mood to ISDS render it to adopt a bifurcated strategy: internationally, it incrementally liberalizes investor-State Arbitration to protect Chinese investors abroad; domestically, it relies on local remedy to protect foreign investors and discourages the use of investment treaty arbitration. This approach contrasts with other jurisdictions and partly explains China’s Disequilibrium in ISDS.