By Luo Yuze, Research Department of Foreign Economic Relations, the Development Research Center of the State Council (DRC)

Research Report No 91, 2014 (Total 4590)

Abstract:

China's use of foreign investment has resulted in many achievements not only in its own economic development, but in the global economy. The environment has changed significantly after the international financial crisis of 2008. On the one hand, the low-cost advantage that China enjoyed for a long period of time grew weaker, competition in domestic market become fierce, and the government intensified its supervision. At the same time, increasing market size, improved industrial support, and simplified supervision allowed China to keep its market appeal. In addition, major economies began a reindustrialization strategy and emerging economies tried to attract investment, both of which posed challenges for China.

China is now in an adjustment phase in its use of foreign investment and needs to reexamine its approach in light of the new situation. It should increase capital cooperation at home and abroad, make high end industrial chain more attractive for foreign capital, create fairer competition, regulate the operations of multinationals, and release China's potential and vitality by using foreign capital, to ensure mutual benefits for both foreign-backed enterprises in China and China's economic development.