Business, Risk, & China’s MCF: Modest Tools of Financial Regulation for a Time of Great Power Competition

Doing business and investing both require mindfulness about risk, and market regulatory systems aim to ensure risk is appropriately disclosed. Recent discussions of today’s international system of Great Power Competition by U.S. Secretary of State Mike Pompeo mention risk from China’s Military-Civil Fusion (“MCF”). For U.S. and U.K individuals and business firms looking to invest in and do business with China, MCF awareness requires consideration of the ways in which all individuals and institutions in China are called to a duty that transcends their personal and civilian identities in their observable roles. As courts and regulators in China continue to demonstrate ever-improving professional procedures for dispute resolutions and regulatory investigations, including fairness in avoiding bias towards either litigating party when both parties are ordinary commercial entities, connecting the dots to MCF reveals a distinct category of embedded risk. MCF imposes obligations flowing in multiple directions among personnel in Chinese courts and agencies, national leadership, national security apparatus, and state-owned or state-championed commercial firms. This risk fits well with familiar tool kits used by U.S. and U.K. investors, business firms, and related commercial parties to make their own best-informed business decisions, as well as the familiar toolkits used within the broader ecosystem of financial regulators and private parties who bring civil litigation, investigation, and whistleblower claims for material misstatements and the like.