China’s Integration with the Global Economy

China’s Integration with the Global Economy

WTO Accession, Foreign Direct Investment and International Trade

Advances in Chinese Economic Studies series

Edited by Chunlai Chen

China’s accession to the World Trade Organization (WTO) in 2001 was widely regarded as a major milestone in the development of the Chinese economy as well as the multilateral trading system. This book provides a remarkable background of information about China’s economy after WTO accession and analyses many important issues concerning China’s economic growth, international trade, transparency of trade policy, regional trade arrangements, foreign direct investment, banking sector liberalization, exchange rate reform, agricultural trade and energy demand.

Chapter 6: Characteristics of FDI Firms in China After WTO Accession

Chunlai Chen

Subjects: asian studies, asian economics, economics and finance, asian economics, international economics


Chunlai Chen INTRODUCTION After China’s accession to the World Trade Organization (WTO), foreign direct investment (FDI) inflows into China have increased rapidly, reaching a peak of US$74.8 billion in 2007, an increase of 60 per cent on those in 2001. The manufacturing sector has been the most attractive sector to FDI. After WTO accession, average annual FDI inflows into the manufacturing sector surged to US$36.44 billion during 2002–06, an increase of 34.86 per cent over those during 1997–2001, and accounting for 68.74 per cent of the total FDI inflows into China.1 This chapter provides a brief overview of the trend of FDI inflows into China and into manufacturing, examines the structural changes of FDI firms in the manufacturing sector and compares the firm characteristics between FDI firms and domestic firms in the manufacturing sector after China’s WTO accession. The chapter is structured as follows. The next section presents the general trend and characteristics of FDI inflows into China. The third section discusses the features of the sectoral distribution of FDI inflows into China after WTO accession. The fourth analyses the structural changes of FDI in the manufacturing sector. The fifth section discusses the firm characteristics of FDI firms as compared with domestic firms in the manufacturing sector. The final section concludes the chapter. INCREASING FDI INFLOWS AFTER WTO ACCESSION FDI flowed into China in three phases (see Figure 6.1): the experimental phase from 1979 to 1991, the boom phase from 1992 to 2001 and the postWTO...

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