Edited by Craig C. Julian, Zafar U. Ahmed and Junqian Xu
Chapter 15: Barriers to foreign direct investment (FDI) in China's hinterland areas
The objective of this chapter is to reveal barriers that limit foreign direct investment (FDI) inflow into China's south-western landlocked border province Yunnan. The Chinese Central Government's intentions to accelerate the development of its south-western frontier are documented by a programmatic article, written by Pan Qi (1985) which lays out what would become a core argument for China's increased engagement with neighbouring countries. Notably, it asserts that an opening towards Myanmar and Southeast (SE) Asia would benefit economically not only China's south-western provinces but the whole nation. First, it is imperative to consider the Central Government's policies and assistance to make Yunnan attractive for foreign investors, and second, to look at the Catalogue for the Guidance of FDI industries and the Catalogue of Superior Industries for Foreign Investment in Central and Western Regions, instituted by the Chinese government, which reveal both policy orientations and guidance for foreign-funded enterprises. Multinational enterprises (MNEs) as well as central and local governments have different considerations in relation to investment strategies and policies. When their strategies come together, it will be easier to attract FDI, as high consistency amongst them means greater support or encouragement and less cost and risk to MNEs. Local encouragement is often given to industries with historical advantages, a high resource endowment and a favourable investment climate, thereby reducing operational costs in many aspects.
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