China has become one of the world's leading destinations for foreign direct investment (FDI) since the Chinese government opted to reform the economy and open it to foreign trade and investment. Inflows of FDI, which accelerated at the time of China's accession to the WTO in 2001, have been an important factor in promoting rapid economic growth and technological progress. However, there remains substantial potential for a greater inflow of long-term, high-technology, high-value-added FDI from OECD countries.
This study records and evaluates the development so far of an enabling environment for FDI and suggests policy options designed to improve it further. Foreign investors were initially attracted to China by cheap land and labour, the promise of a large market and, to some extent, by fiscal incentives. To sustain and increase large-scale FDI inflows, it is now necessary to move towards a more strongly rules-based attraction strategy, based on structural elements which will include a sound legal system, transparent laws and regulations, streamlined investment approval procedures, good corporate governance, effective competition policy and a sound financial system.
- 02 July 2003
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- Xiuhong Ma
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Foreign investment absorption is a key component of China’s basic state policy of opening to the outside world. During its nearly twenty-five-year-long reform and opening up, China has steadfastly adhered to its opening-up policy, vigorously developed foreign trade and actively absorbed foreign investment, having made world-renowned achievements. After being the largest FDI (foreign direct investment) recipient among all the developing countries for nine consecutive years since 1993, China ranked the first in the world in terms of FDI inflow in 2002. By the end of April 2003, 436 394 foreigninvested enterprises had been established in China, with actually utilized foreign investment of over US$460 billion. Investors come from over 180 countries and regions. Over 400 multinational companies out of the world’s top 500 have made investment to establish their operations in China...