The flaws and drawbacks of China's legal and business systems didn't stop Chinese factories from plugging into the global manufacturing network, but they are hurdles keeping Chinese companies from expanding globally.

That's the most important point from the following videotaped conference speech [in English] by Long Yongtu, the former chief trade negotiator who brokered China's accession to the World Trade Organization in 2001.
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Long wasn't reluctant at all to point out that China lacks a stable, transparent, predictable legal system. On the unlevel playing field, foreign-invested companies and state-owned companies have long enjoyed better treatment than China's small and midsize local companies, which have difficulties getting land, tax breaks, etc.

It's also my personal observation that many Chinese companies thrive by taking advantage of the people-based -- versus rule-based -- system. Good for them. But these domestically successful companies are so used to the Chinese system that they are not prepared when investing abroad. Part of the blame goes to the deep roots of Chinese culture. Neither rule by law nor transparency is a tradition in China.

On the other hand, Long's stance on the openness of Chinese's economy is firm. He said business transactions shouldn't be politicized. He mentioned as an example Coca-Cola's attempt to acquire Chinese juice maker Huiyuan, which is still going through anti-monoply hearings in Beijing. Well, he forgot that quite a few Chinese conglomerates have failed to acquire overseas companies because of political resistance from the host countries.