FOREIGN DIRECT INVESTMENT: PEOPLE'S

REPUBLIC OF CHINA

The economic system of China is greatly influenced

by the Maoist form of administration.

Figure 1. FDI inflow into the PR China from 1978 -2004.

FOREIGN DIRECT INVESTMENT: PEOPLE'S
REPUBLIC OF CHINA

1979 1992 2001

Figure 2. Sectoral distribution of FDI.
The Catalogue for the Guidance of Foreign Investment
Industries states the rules and conditions for FDIs and
the licensing of foreign businesses in China.
The FDI flow in China is resource-oriented wherein the
large supply of cheap, unqualified labor in the Chinese
economy is being utilized.
Figure 3. Proportion of companies with foreign capital share of Chinese industrial production.
FDIs in China have continued to flourish in the industrial
(gravitational) centers that have caused a positive self-
reinforcing effect on these certain regions of the country.
This has caused the flooding of unqualified workers of
up to 150 million into these areas to escape the poverty
and unemployment in their hometowns. In effect, the
cost of labor remained at low levels.
FDI has promoted the development of the gravitational
regions in China. However, this has accelerated and
cemented the regional imbalances and income
disparities across China.