1887

OECD Working Papers on International Investment

Selected studies on international investment and investment policy prepared for use within the OECD. They address such issues as investment agreements, dispute settlement, fair and equitable treatment, most favored nation treatment, and corruption.

English

China Investment Policy

An Update

This working paper examines China’s investment policy since the publication of the 2008 OECD Investment Policy Review of China. China remains the largest recipient of FDI among developing countries and FDI continues to play a disproportionately large role in promoting China’s trade, investment and tax revenue generation, albeit not as large as before. A number of structural changes occurred in recent years, including a slight revival of equity joint ventures, faster growth in services-sector FDI than in manufacturing, and a reorientation of FDI from the Eastern Region to the Central and Western Regions. In addition, China has been rapidly becoming an important source of outward foreign direct investment (OFDI), a trend that was reinforced by the global financial and economic crisis. While foreign investor confidence is maintained by China’s economic strength, it is being undermined by rising labour costs and shortages of skilled labour and by greater competition (especially from Chinese companies). In addition, there are fears that an investment protectionist trend may be emerging in China, as evidenced by, for example, perceived discrimination against foreign-owned companies in government procurement. The Chinese government has taken a number of measures to streamline and decentralise FDI administration and strengthen enforcement. The emphasis has been on aligning inward FDI flows more closely with national priorities, including upgrading industrial sophistication, supporting innovation, setting up outsourcing industries and developing poorer hinterland regions. The most important change is the three-fold raising of the ceiling on provincial examination and approval authority over foreign investment projects in the “permitted catalogue”. Merger notification discrimination against foreign investors has been removed and a national security review process for cross-border M&As has been announced. The Chinese government should continue its efforts to liberalise and increase the transparency and predictability of the framework for both inward and outward FDI.

English

Keywords: international investment, China, state-owned enterprises, level playing field, foreign investment, international investment agreements, investment treaties, bilateral investment treaties
JEL: L32: Industrial Organization / Nonprofit Organizations and Public Enterprise / Public Enterprises; Public-Private Enterprises; L21: Industrial Organization / Firm Objectives, Organization, and Behavior / Business Objectives of the Firm; F52: International Economics / International Relations, National Security, and International Political Economy / National Security; Economic Nationalism; F02: International Economics / General / International Economic Order and Integration; F23: International Economics / International Factor Movements and International Business / Multinational Firms; International Business; G34: Financial Economics / Corporate Finance and Governance / Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance; F63: International Economics / Economic Impacts of Globalization / Economic Impacts of Globalization: Economic Development; F21: International Economics / International Factor Movements and International Business / International Investment; Long-term Capital Movements
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