During the past 23 years when China implemented reform and opening up, China has developed at a supernormal speed in absorbing foreign investment and has made great achievements attracting the world attention. Up to the end of September 2002, China has ratified an accumulative total of 414,796 foreign-invested enterprises with contracted investment of US$813.667 billion and US$434.78 billion have been put into use, thus China has become one of the countries that absorbed the most foreign investments. Since 1993, China has in many subsequent years turned into a country that attracted the most foreign investment among developing countries and also topped the world in absorbing foreign investment.
The fundamental reason why China has been obtaining so much foreign investment was merely that China has offered a favourable investment environment for the investors from all over the world to invest, manufacture and manage.

During the past 20 years of reform and opening up, the national economy has been keeping a high-speed development with an average increase speed of two -digits , and has topped the countries all over the world. Since the latter period of the 1990s, the increasing speed though to certain extent dropped, still reached 7-8%, which was really commendable under the circumstance that the global economy increase slowed down. The Gross Domestic Product in 1997 was RMB7, 446.3 billion yuan, RMB7, 939.6 billion yuan in 1998, RMB8.205.4 billion yuan 1999, RMB8.940.4 billion yuan 2000, RMB9, 593.3 billion yuan in 2001 and is expected to exceed over RMB10 trillion yuan in 2002 and become the sixth largest economic entity of the world.
China's economic development level was also improved with a high speed, the per capita GDP was nearly US$1,000, the people's living standard has been improving by a big margin and the problem of providing them with adequate food and clothing was settled, and some places and people have already took the lead in accession into the middle-advanced level.
Viewed from the increase of national economy and its development prospects, China also behaved tremendously well. The economic rate of increase during 1998-2001 was about 7.5%, which was still the highest in the world. The possible rate of increase of 2002 is 8% and is expected to be about 8% in the years to come. Meanwhile, the macro-economic environment was fairly stable. The government has, in recent years, energetically taken positive financial policies to stabilize exchange rate and reduce deposit interest rate so as to promote the development of economy; as a result, the residents' savings have been on constant rise and have exceeded RMB8 trillion yuan. From the perspective of factors of production, China's production costs consisting of labor force, raw materials and service and so on still possess powerful global competitiveness. The cost of payment is enormously under that of the developed countries and as well under that of most developing countries. China also increasingly elevates its economic opening degree. The total volume of export and import amounts US$600 billion in 2002, covering more than 40% of the proportion of GDP. Of which there is over US$300 billion of export, covering about 25% of the proportion of GDP, even more than that in many developed market economy countries. And foreign investment deposit amounts for more than US430 billion, covering about 1/3 of the GDP of the whole year; and an annual foreign investment of about US$50 billion has been absorbed, covering about 4% of the GDP. The above indicated that China's favorable macro-economic environment offers realistic conditions and reveals a broad prospect for foreign investment

China, with vast territory, abundant resources, beautiful landscape, agreeable climate, is fit for various kinds and scales of foreign investment. The area of China's land is more than 9.6 million square km, and is only next to that of Russia and Canada. China is characterized by both the continental monsoon climate and complicated and diversified climate. Also China stretches from the south to the north the equator belt, torrid zone, sub-torrid zone, warm temperate zone, temperate zone and cold temperate zone, and there exists in these regions great discrepancies of natural conditions and evident diversities.
As to the natural resources, China possesses rich agricultural resources, various advanced planting and aquaculture industries with complete categorizes and perfect production system including agriculture, forestry, livestock and fishery. Dozens of mineral resources topping the world and huge storage of natural resources make China one of the few largest countries in the world with the most resources, which enable China to have great superiority in absorbing resource-seeking foreign investment. At the same time, rich natural resources just support various kinds of manufacturing or service industries for foreign investment.
In recent years, China's infrastructure has been greatly improved, and the infrastructure constructions like transport, telecommunication, water, electricity and gas supply, etc. have been basically matured, and the capacity and quality of energy, raw material and component supply were also obviously elevated, providing a favorable external production management conditions for foreign investment.

China is now implementing a socialist market economy and the government is carrying out marketization management on the economy and the market decides resource supply, commodity and service offer and price. Enterprises make their own management decisions, thus the framework of market economy system start to be initially established and which provides an appropriate production and management environment for foreign investment.
Firstly, China's political situation was stable and the people lived and worked in peace and contentment, which created necessary social conditions for attracting foreign investment.
Secondly, the initially established market economy system and the gradually perfected laws and rules created favorable legal environment for foreign investment.
Thirdly, with the raising of educational level and amplification of opening up degree, the people's diathesis improved, their greatly changed ideological ideas and dwindled discrepancies of languages, cultures and customs, have offered proper social environment for foreign investment.
Fourthly, the amount of labor force with improved diathesis was sufficient. The cost advantage caused by abundant cheap labor forces provided tremendous opportunities for foreign investors to invest on the labor-intensive industry, actually, over half of the foreign investment gathered in the labor-intensive industries. On the other hand, China also possessed related number of skilled labor forces that have accepted favorable training and education, and can meet the requirements of foreign investment on high-tech industries . In the fields of enterprise management, law service and accounting, etc, there was deficiency for the special sophisticated talents; however, this status is changing.
Fifthly, related foreign investment policies have also adapted to the requirements of market economy and international rules. Industrial policy has become an important way for China to control foreign investment. According to the development strategy of national economy and industrial development, China established comprehensive industrial policies for foreign investment to lead them to invest in target industry. The Chinese government in April 2002 issued the newly amended "Catalogue for the Guidance of Foreign Investment Industries," encouraged more foreign investment to flow into target industries, for example, agriculture, resource development, infrastructure construction, export and high-tech industry, however, the government has specifically prescribed industries those are not allowed to erect exclusive foreign-funded enterprises and the strategic industries and investment fields that the Chinese part must hold a controlling share. According to the commitments to WTO entry, the opening degree of the industries will be increased by a large margin. For example, telecom service industry is to shifted from the prohibited category into limitation category, and the geographical area and business scope of finance, insurance, commerce and foreign trade and so on will be further enlarged. The strategy of Western Development has already been carried out in order to develop regional economy harmoniously, and the government has enacted the "Advantageous Industries Catalogue for Foreign Investment in Middle and Eastern Regions" to practice preferential policies for foreign investment in these advantageous industries
As for foreign trade management, China has greatly reduced the customs, gradually called off the plan, quota and warrant management, ensuring the transparency of establishment and implementation of related policies. In addition, foreign exchange control will also be loosened step by step.

1.Energetically improve the political and legal environment for foreign investment, and to enhance legal administration level. According to our commissions for joining WTO and the requirement for our opening-up process, we will further improve the legal system of absorbing foreign investment, keep on the steadiness, consistency, predictability and feasibility of the policies and laws of foreign investment laws, try to create a united, steady, transparent and predictable environment for foreign investment. We will further simplify the examination and approval procedures for foreign investment and adopt a standardized examination and approval system; reinforce our sense of legality, try to be open, just and transparent, and establish an incorruptible, industrious, pragmatic and effective government, creating a good administrative environment for foreign investment.
2. Maintain and improve an open and fair market environment. We should combine this with the current work of rectifying and standardizing the order of market economy, prohibit firmly the improper collecting fees from foreign companies as well as improper inspection and fine of them. Measures should be taken to destroy local protectionism and industrial monopoly. We should also enhance the lawful measures to protect the intellectual property right and take strong actions against illegal piracy, therefore, establish an open, unified and fair market environment, further perfect the complaining mechanism of foreign-funded and protect the legal rights of foreign merchants according to law.
3. Further open the field of service industry. In accordance with China's self-development and Commitment to the WTO, we will open this field vigorously and steadily and systematically, perfect rules and regulations for service industry and formulate a united and standard system for accession into the market of foreign investment service. We will encourage the import of modern service concepts and advanced management experiences, technologies and modes of modern market operation, improve structure of service industry in China.
4. Encourage foreign businessmen to invest in the new high-tech industry, the basic industry, and supporting industry. The ability of technology innovation and sustainable development directly reflect the competitiveness advantages of a country. We will continue to encourage foreign investors to introduce, develop and innovate technology and to invest in technology-intensive project, and projects with advanced technology and to guide in enterprise registered capital proportion limitation and funding condition. The relevant stipulations of setting pioneering investment enterprise should also be consummated in order to facilitate the conditions of setting and developing high-tech corporations. We should attract foreigners to invest in supporting industry and encourage the localization of new materials, push domestic small and medium-sized enterprises to enforce cooperation with foreign companies and introduce the advanced and applicable technology to match the large foreign-funded enterprises, thus to enter the production and sales network of multinational companies.
5. Attract actively more multinational companies to invest in China. Multinational companies as leading force of today's world economy. We will pay more attention to improve the relevant policies to attract multinationals to invest in China, establish the local headquarters and set up cross-country procurement centers. Using the experience and methods of merger and acquisition of other countries and taking the economical system with China's characteristics and realities of into consideration, we should speed up the step to draft and improve the practical policy and stipulations of investment through merger and acquisition, further revise the relevant stipulations of the foreign-invested share-holding companies, push the formulation and perfecting of BOT and special permission transfer investment methods, the various stipulations for foreign-funded enterprise's listing domestically and abroad.
6. Further promote foreign invest in the central and western regions. Vast areas in these regions are rich in resources for farming and stock raising, mineral resources and tourist resources. With a large population and a market of great potential labor forces, other key elements for production are relatively inexpensive with the steady progress and western development strategy, such facilities as transportation, communication and construction has impressively improved. Because of the improvement of investment environment and ecological development and emergence of potential for the development of specialty economy, foreign businessmen who invest in these regions are facing brand-new opportunities and great development space.

Next Page