Unfair trade wars

"Some local courts even have a slogan on the wall saying, 'We are the protectors of local companies', instead of saying, 'We are the place for justice'," he says.

"This is very different to industrialized countries. In European courts any judgment would be part of the judicial process. In China there is an extra judiciary route and you can have a case reviewed by local government, provincial government and up to central government," he says.

As a result many foreign companies put arbitration clauses in any contracts they sign with Chinese companies.

China has to honor arbitration agreements under an international convention it signed up to in the late-1950s.

Any disputes arising under such contracts have to be settled at an arbitration court.

Some take advantage of the International Court of Arbitration, which has a secretariat in Hong Kong.

Tao says it can be very difficult for foreign companies in China because protectionism works in many ways.

"You get some companies in joint ventures with a minority stake who lose control altogether. They want their money back but the Chinese company won't let them have it. It wants their money working for them while the foreign company has no clue what is going on," adds Tao.

Many European and other foreign companies, however, still have no choice but to do business in China if they want to take advantage of one of the world's fastest growing markets.

Li insists it would be irrational for China to be overly protective of its economy.

"China is fully aware that if it imposes too heavy trade barriers on other countries, they could impose heavier ones on Chinese companies, which would be no good for the development of China's industries," he says.

"China still needs foreign investment and is the last country that would hope for a trade war."