Foreign Direct Investment in China

Foreign Direct Investment in China

Location Determinants, Investor Differences and Economic Impacts

Chunlai Chen

Foreign Direct Investment in China is one of the most comprehensive studies of FDI in China and provides a remarkable background of information on the evolution of China’s FDI policies over the last 30 years.

Chapter 2: The Evolution and Main Features of China’s FDI Laws and Policies

Chunlai Chen

Subjects: asian studies, asian economics, economics and finance, asian economics, international economics, political economy, politics and public policy, political economy


INTRODUCTION Since 1979, China has carried out massive economic reforms aimed at the establishment of an open market economy. One of the prominent features of these reforms has been the removal of restrictions on inward FDI in the Chinese economy. From the very beginning, policy reform for FDI has been one of the most important aspects of China’s overall economic reforms. For historical and ideological reasons, FDI in China was highly restricted prior to 1978. In order to achieve new objectives of industrialization and economic development, however, China began to relax restrictions on FDI into its domestic economy at the end of 1978. Since 1979, the FDI regime has been liberalized gradually, and a series of policies and laws for FDI has been implemented, aimed at attracting a high level of FDI inflows and accelerating the transfer of technology and modern management skills, as well as at providing foreign exchange. China’s success in attracting FDI inflows into its domestic economy has been closely related to the formation and development of its legal framework and policies for FDI. To understand that success, one must first analyse and understand the evolving changes of China’s legal framework and policies towards FDI. Given the total opposition to FDI during the Cultural Revolution period, this policy shift involved the abandonment of established orthodoxy and the development of an entirely new policy framework. Therefore, this chapter analyses several key aspects reflecting the evolving changes to China’s FDI policies and laws during the past three decades. THE...

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