Inward Foreign Direct Investment in China and Its Policy Context

After opening its doors to foreign trade and investment in 1978, China has become the largest recipient of inward foreign direct investment among developing and transition economies. The early policy of investment attraction, by means of fiscal incentives and special economic zones, has been relaxed now that many, though still not all, operating environment deficiencies have been effectively addressed and strong domestic enterprises have developed. While China remains the developing world's favourite investment destination, the government is adopting a more selective approach that may result in slower IFDI growth. The global crisis reduced FDI inflows to China, but this impact was lower than in many other FDI destinations, and flows have recovered considerably.