This chapter shows how the Chinese commercial legal system has improved significantly over the past two decades, to the extent that in most cases it compares favorably in dispute resolutions outcomes with legal systems in most liberal democratic nations. However, it falls short of a "rule of law" system in certain types of cases due to three distortions interfering with decision-making by courts: political interference by local and sometimes central government officials; corruption; and guanxi (personal relationships) involving judges or senior court/government officials. The chapter uses the case of Judge Wang Linqing and the Shaanxi Billion Yuan Mining Rights dispute to demonstrate that these distorting elements have infected legal institutions right up to the Supreme People's Court and involve senior Chinese Communist Part leaders within China's anti-corruption agency and Politburo, making the problems very difficult to stamp out.

This chapter offers a landscape of China’s foreign investment law – its evolution in the past four decades, the key distinctive features of the foreign direct investment (FDI) regime, the recent developments of foreign investment law (FIL). The chapter lays down a foundation from which to comprehend China’s BIT regime, which initially was put in place to attract FDI and boost economic growth and was later to provide better investor protection to China’s outbound investment. The evolution of Chinese FIL demonstrates the gradual developments of the Chinese legal system and regulatory framework, and, more importantly, the changing role and function of the government in this process. There appears to be a gap between legal systems and governmental functions among China, Western countries and other developing or emerging economies. This gap explains the difficulty in converging the BIT laws. But the evolutionary path is also clear in the sense that both the legal system and the regulatory structure are more liberalized, market-oriented and investor-friendly than they used to be.