Exit Bans When Doing Business in China

This article investigates and measures the frequency, fairness, and efficacy of exit bans in China. We limit our definition of “exit bans” to civil business disputes between a foreign businessperson and his or her local Chinese counterpart, where the foreigner is prevented from leaving China. A traveler typically learns of an exit ban at the airport when he or she is not allowed to board a flight; accordingly, an exit ban is distinct from a debt hostage situation in which the foreigner’s freedom of movement within the country is restricted.To conduct our study, we submitted Freedom of Information Act (FOIA) requests (or their equivalents) to six Western governments of countries that engage in significant trade with China and whose citizens were subjected to an exit ban preventing them from leaving China. We also conducted a separate content search and analysis of English and Mandarin media articles that discuss exit ban situations in China. Our analysis yields five primary findings. (1) The data reveal at least 128 total cases, and approximately one-third of the cases were driven by business disputes. It is likely that many more of the 128 cases were caused by business disputes, but because much of the data we received from government agencies was provided in aggregate form, we were unable to verify the driving force behind such cases. (2) In the business-related cases, Chinese authorities generally appeared to follow applicable exit ban laws and application processes, thereby pushing back on the narrative that local norms and a culture of ignoring the law trump the legal mandates issued from Beijing. (3) Most exit bans took place in Tier 1 cities or coastal regions (where more foreign business activity is concentrated), although scattered cases occurred in more remote locations, thus indicating that foreign business interests may be at risk in cities of diverse sizes throughout China. (4) The concern within the international business community that the term “responsible person” under Chinese exit ban law would be abused by authorities to also restrict the movement of non-senior level businesspeople finds some limited confirmation in our data, although most exit ban cases we located were brought against senior-level executives. (5) Approximately two-thirds of the exit ban cases uncovered in our media searches involved business disputes in standard or commoditized industries, not specialized or high-value-add industries (our FOIA data was not sufficiently granular in terms of type of business or industry).Relying on these findings, the article concludes with four practical recommendations that business leaders can use to better evaluate and manage exit ban risks in China