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The Challenges And Opportunities Facing A Foreign Investor Seeking To Invest In China

2533 words - 11 pages

I Introduction
Nowadays, more and more foreign investors are attracted to invest in China since the reform and opening-up policy was accepted in 1979. In the process of reform, the promotion of foreign direct investment has been considered as an important task because it can boost the growth of economy. In addition, foreign direct investment plays a vital role in the development of both developed countries and developing countries.
However, foreign investors face both challenges and opportunities when seeking to invest in China. The essay will analyze the opportunities of China faced by foreign investor by large market size and economy growth, foreign direct investment policies ...view middle of the document...

Moreover, the Chinese economic conditions became better and better after the reform, which also increase the purchasing power of people. This situation creates good chances to attract market oriented foreign direct investment such as electronics, chemicals and automobiles industries though the per capita GDP in China is still low.
As a result of the reform and opening-up policy, the China’s economic development experienced a tremendous change. In the last thirty years, the economic position has increased about twenty-fold. In recent years, the economic growth rate remains nearly 7 percentages and the real GDP growth has averaged 10 percent every year (Arora, V. & Vamvakidis, A., 2010). All of these provide more opportunities for foreign investors to look for good geographical locations and new markets to expand their businesses.

(ii) FDI policies
The foreign direct investment policies are important for foreign investors to seek a good place to invest. Since the reform and opening-up policy had been accepted in 1979, China opened its market to foreigners and attracted great much foreign direct investment gradually. Also, the priorities of policy have changed with the development.
During 1978 to 1983, the Chinese government permitted joint ventures into Chinese market by setting up four Special Economic Zones (SEZs), that is, Shenzhen, Shantou, Zhuhai and Xiamen. These SEZs provided foreign investors with many preferential treatments when they expanded their businesses into Chinese market. And the government had taken measures to ensure the rights and benefits of both foreign investors and Chinese market. For example, in July 1979, “The Law of the People’s Republic of China on Joint-Ventures using Chinese and Foreign Investment” was adopted. This legislation granted the legal status of foreign investment in China and ensured the interests of foreign investors. Furthermore, there was another important policy that was formulated in 1983, “the Regulations for the Implementation of the Law of the People’s Republic of China on Joint Ventures using Chinese and Foreign Investment”, which create a good business environment for foreign investors and liberalize the Chinese market.
In the period of 1984 to 1991, although the government had taken action to ensure the benefits of foreign investors, there are still flaws in handling FDI. The foreign ownership and their domestic sales still limited by laws and regulations in the SEZs. Up to 1984, Deng Xiaoping announced that China should open its market wider (Zheng, 1984). Then another fourteen coastal cities opened its market to the outside world. Compared to SEZs, these cities were more freely to make economic decisions. For example, Shanghai could approve all foreign direct investment projects when its capital investment under 30 million dollars (Yuan, 2006). Another important policy is the 1986 Provisions because it incented FDI rather than just permitting it. “The Law of the...

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