What Do You Know About The Foreign Direct Investments In China?

Beginning in late 1978 China's leadership decided to move the economy away from a centrally planned system to one that was more market driven, while still maintaining the rigid political system. The strategy had a number of key elements including a switch to house-hold responsibility in agriculture instead of old collectivization, increases the powers of the management and plant managers in industry, establishment of small to medium scale private enterprises in services and light manufacturing and increased foreign trade and investment. The result has been two decades of sustained high economic growth rates of between 10 and 11 percent annually compounded.

Starting from a tiny base foreign investment surged to an annual average rate of 2.7 billion dollars between 1985 and 1990 and then surged to reach 40 billion dollar annually in the late 1990s making China the second biggest recipient of foreign direct investment inflows in the world after the United States. Although world foreign direct investment flows slumped in 2001 and 2002, China still attracted close to 50 billion dollars in each year. Over the past 20 years this inflow as resulted in establishment of 170,000 foreign funded enterprises in China. The total stock of foreign direct investment in China had grown to 395 billion dollars in the year 2001.

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