Foreign Investment Data

China’s Economy

China’s economic growth rates have been fueled by major market-oriented reforms focusing on expanding the industrial and manufacturing sectors, which have also become China’s comparative advantage on the global market: exporting cheap manufactured products. This trend has been coupled with the Chinese government’s attempt to attract considerable amounts of foreign direct investment in China (also known as FDI in China).

According to the IMF, China’s reforms since the late 1970s allowed foreign direct investment to grow up to $45 billion a year in the mid 1990s, making China the world’s second largest recipient of foreign direct investment after the United States. Although the centralized authoritarian political regime in China may have caused an over-reporting of foreign direct investment, this has not stopped the inflow of foreign capital pouring in China’s economy.

Foreign Investment in China

The main sectors that have received large amounts of foreign investment have been the manufacturing sector (receiving more than 60% of the FDI volume), followed by the real estate sector (receiving about a quarter of the FDI volume), and the distribution sector (receiving less than 6%).

Foreign direct investment was channeled in two directions: domestically-oriented, where investors tried to tap into the huge market potential that a country with a billion residents possesses; and export-oriented, where foreign investors opened up companies that would assemble parts of products or manufacture products at one of the lowest costs in the world.

The large inflows of foreign investment have spurred economic growth and encouraged the expansion of the labor force, which in turn have allowed China to bring a massive amount of its population out from under the poverty line. Infrastructure development also benefited greatly from foreign investment.