Title: Foreign Direct Investment – the China story
Headings: Foreign Direct Investment – the China story
Foreign Direct Investment – the China story
STORY HIGHLIGHTS
Newsletters

Content: According to the Ministry of Commerce (MOFCOM), foreign invested enterprises account for over half of China's exports and imports; they provide for 30% of Chinese industrial output, and generate 22% of industrial profits while employing only 10% of labor – because of their high productivity. Evidence on technology spillovers is more limited, but industries with higher FDI seem to have higher productivity increases than other industries, suggesting a positive effect. Importantly, foreign investment has catalyzed China’s economic reform. Together, these contributions have supported China in maintaining a record-high 10 percent growth rate during most of the 1980-2010 period. FDI policies in China have evolved alongside economic development and strengthened institutional capacity. A gradual and prudent approach has been taken in the process of liberalization. When market institutions were not fully in place in 1980s and 1990s, China experimented with opening up to foreign investment in selected coastal cities and in special economic zones/industrial parks with a focus on attracting export-oriented manufacturing FDI. Corresponding to China’s shift of its development goal from an emphasis on GDP growth towards a more harmonious balanced development, China made a radical commitment to services liberalization in its accession to WTO. This has triggered a shift of FDI to service industries.