-Three Characteristics of Chinese FDI over the past decade:
1. FDI has been the predominant form by which China has accessed global capital
2. An unusually large proportion of FDI is in manufacturing, as opposed to services or resource
3. FDI flows have predominantly come from other East Asian countries
17.1 FDI in the Chinese Economy
- FDI came into china during the years before the 1989 Tiananmen Massacre but after Deng made some
strong speeches in 1992 the funding started to pour in again.
-The speeches helped because the institutions for FDI inflow were already in place and after 1992
China opened its domestic markets for foreign investment.
-China’s GDP growth has been even more rapid than the growth of FDI inflows. (Share of FDI is
17.2 “Zones”: The Gradual Liberalization of the Investment Regime
Special Economic Zones (SEZs)= (first one in 1979) are regions in which foreign investment is
encouraged by lower tax rates, fewer and simplified administrative customs procedures, and, most
crucially, duty-free import of components and supplies.
-They permitted incremental progress within a rigid system. They served as test beds for domestic
Economic and Technological Development Zones (ETDZs)= Zones that were set up during
and after the second wave of reform in 1984. They are very similar to SEZs. Insistent
17.3 The Investment Regime Today
- China is pretty favorable for foreign investors. One advantage is the fact that projects can be granted by
different parts of the government (Provincial, municipal and federal governments can all approval FDI
projects). Investors can thus play localities against each other for favorable conditions.
17.4 Sources of Investment in China
- By far the largest source of investments come from Hong Kong, Taiwan, Macau, and other free ports or
-Surprisingly the Triad (US and Canada, Japan, and the EU) only account for 25% of FDI where they
normally account for 90% in other developing countries.