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As Chinese companies accelerate their overseas expansion, they face mounting legal and compliance risks driven by geopolitical flux, tighter international regulation and the rise of the digital economy. Corporate leaders must therefore embed systematic risk management at the strategic level to ensure stable growth of their international business.

Analysis suggests that Belt and Road investment is shifting from infrastructure towards industrial and technology collaboration, with political and regulatory risk emerging as a core variable in cross-border ventures. For critical infrastructure projects, the stability of concession rights demands close attention, while data compliance and technology regulation are fast becoming legal flashpoints. Companies should respond by building a multi-layered legal protection framework through investment structuring, investment treaties and international arbitration mechanisms.

Trends

The Belt and Road investment used to focus on transport, power generation and energy infrastructure. Recent years, however, have seen the investment profile progressively shift towards industrial and technology collaboration. This means that companies must now contend not only with traditional construction-related legal issues, but also with emerging risks in data compliance, technology regulation and industrial policy, with risks varying across sectors.

1. New energy: Typically structured around photovoltaic, power and energy storage projects, with legal concerns on power purchase agreements and government guarantees.
2. Ports and logistics: Typically structured around port concessions and shipping co-operation, with legal concerns on the stability of concession rights.
3. Digital economy: Typically structured around data centres and telecommunication networks, with legal concerns on data security and cross-border transfer compliance.
4. High-end manufacturing: Typically structured around overseas industrial parks and joint ventures, with legal concerns on foreign investment rules and technology regulation.

Belt and Road projects usually operate through multi-layered investment structures. The transaction frameworks and investment models include equity participation and project financing, EPC contracting and long-term operation, and PPP and concession arrangements. The associated contract architecture encompasses project development agreements, concession agreements, power purchase agreements, financing agreements and government guarantees.

Investment risks

Corporate overseas investment risks generally cluster into five key areas:

1. Political risk arising from government transitions or policy shifts, potentially triggering project termination or renegotiation;
2. Regulatory risk arising from foreign investment restrictions or approval changes, possibly requiring adjustment of investment structures;
3. Contract risk stemming from unstable concession rights, exposing companies to commercial disputes or losses;
4. Data and technology risk arising from cross?border data regulation, where non?compliance can lead to penalties; and
5. Financial risk comes in the form of exchange controls and financing constraints, possibly eroding investment returns.

For major infrastructure and energy ventures, political and regulatory risks typically make or break project stability.

Hot spot

A recent case that has drawn widespread attention in international investment circles involves a foreign government¡¯s revocation of a port concession held by an overseas enterprise.

The overseas company had long operated two strategically located ports at either end of a key canal and was in the process of selling its global port assets to an international shipping consortium. However, the country¡¯s Supreme Court ruled that the concession agreements were unconstitutional, prompting the government to terminate the concession and assume operational control. The move has not only jeopardised a multibillion-dollar global port transaction, but is also set to trigger international arbitration claims.

The episode underscores how, in critical infrastructure sectors, commercial investment is often deeply intertwined with national strategy and geopolitics.

For Chinese companies investing in the Belt and Road countries, political risks now extend beyond traditional threats of war and expropriation towards more subtle forms of sovereign default and regulatory change. Examples include a new host government refusing to honour concession agreements signed by its predecessor, or imposing environmental and labour regulations that indirectly inflate project costs. Standard contract models of International Federation of Consulting Engineers (FIDIC), with their broad force majeure clauses, offer little protection against such acts of governmental opportunism.

Full-cycle risk model

The Belt and Road investment risks typically span three phases: pre-investment, execution and post-investment. Companies therefore need to establish a full-cycle legal risk management framework, deploying tailored legal strategies at each stage:

1. Pre-investment risks centre on foreign investment restric- tions and policy uncertainty. Mitigation requires thorough due diligence and careful structuring of the investment;
2. Execution risks arise from contract performance and govern- ment approvals. The focus should be on contract management and building robust compliance systems; and
3. Post-investment risks involve policy shifts and disputes. Companies should turn to international arbitration and investment protection mechanisms.

Recommendations

Country-specific legal monitoring systems. For priority investment destinations, companies should leverage local legal resources to track real-time changes to investment restrictions, tax and labour laws.

Stress tests on existing contracts. Companies should review their current Belt and Road project agreements, focusing on the robustness of force majeure clauses, change?of?law provisions and termination compensation formulas to identify potential exposure to political risk.

Cross?jurisdictional legal collaboration. For complex projects, companies should assemble a legal team comprising a Chinese law firm, a leading local counsel in the host country, and international arbitration specialists. This ensures that transaction structures comply with Chinese regulatory requirements, integrate seamlessly into the host legal system, and possess the resilience to withstand international arbitration challenges.

Zhang Tianyi is a partner at Tahota Law Firm. He can be contacted by phone at +86 136 0881 0332 and by email at tianyi.zhang@tahota.com