China Fdi
Columbia FDI Profiles
Country profiles of inward and outward foreign direct investment issued by the Vale Columbia Center on Sustainable International Investment October 18, 2010
Editor-in-Chief: Karl P. Sauvant Editor: Thomas Jost Associate Editor: Ken Davies Managing Editor: Ana-Maria Poveda-Garces
Inward FDI in China and its policy context by Ken Davies∗ After opening its doors to foreign trade and investment in 1978, China has become the largest recipient of inward foreign direct investment (IFDI) among developing and transition economies. The early policy of investment attraction by means of fiscal incentives and special economic zones has been relaxed now that many - though still not all - operating environment deficiencies have been effectively addressed and strong domestic enterprises have developed. While China remains the developing world’s favorite investment destination, the government is adopting a more selective approach that may result in slower IFDI growth. Although the global crisis reduced FDI inflows to China, this impact was lower than in many other FDI destinations, and flows have recovered considerably. Trends and developments Country level developments From the establishment of the People’s Republic of China in 1949 to the adoption of economic reforms in 1978, there was almost no foreign investment in China. In the 1980s, experiments with joint ventures resulted in a trickle of FDI inflows dominated by the relocation of most of Hong Kong’s manufacturing to South China. IFDI first topped US$ 1 billion in 1984 and by 1991 was US$ 4.4 billion. 1 With new urgency given to foreign investment attraction at the beginning of 1992 and the formal establishment of a market economic system in that year, IFDI inflows accelerated rapidly, reaching US$ 11 billion in 1992, continuing up to a plateau of US$ 45 billion per year in 1997-1998. Following a
∗
Ken Davies (kendavies@yahoo.com) is Senior Staff Associate at the Vale Columbia Center for
Country profiles of inward and outward foreign direct investment issued by the Vale Columbia Center on Sustainable International Investment October 18, 2010
Editor-in-Chief: Karl P. Sauvant Editor: Thomas Jost Associate Editor: Ken Davies Managing Editor: Ana-Maria Poveda-Garces
Inward FDI in China and its policy context by Ken Davies∗ After opening its doors to foreign trade and investment in 1978, China has become the largest recipient of inward foreign direct investment (IFDI) among developing and transition economies. The early policy of investment attraction by means of fiscal incentives and special economic zones has been relaxed now that many - though still not all - operating environment deficiencies have been effectively addressed and strong domestic enterprises have developed. While China remains the developing world’s favorite investment destination, the government is adopting a more selective approach that may result in slower IFDI growth. Although the global crisis reduced FDI inflows to China, this impact was lower than in many other FDI destinations, and flows have recovered considerably. Trends and developments Country level developments From the establishment of the People’s Republic of China in 1949 to the adoption of economic reforms in 1978, there was almost no foreign investment in China. In the 1980s, experiments with joint ventures resulted in a trickle of FDI inflows dominated by the relocation of most of Hong Kong’s manufacturing to South China. IFDI first topped US$ 1 billion in 1984 and by 1991 was US$ 4.4 billion. 1 With new urgency given to foreign investment attraction at the beginning of 1992 and the formal establishment of a market economic system in that year, IFDI inflows accelerated rapidly, reaching US$ 11 billion in 1992, continuing up to a plateau of US$ 45 billion per year in 1997-1998. Following a
∗
Ken Davies (kendavies@yahoo.com) is Senior Staff Associate at the Vale Columbia Center for