Foreign Direct Investment in China

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FDI in Figures

The absorption of FDI flow is part of China's opening up to the outside world. After reaching a peak in 2008 and subsequently falling under the effects of the global economic crisis, FDI flows have recovered and the trend should continue in the future.
China is an unexploited market and a potential for considerable growth due to several reasons:
- It's the biggest internal market in the world with 1.3 billion potential customers;
- it's a rapidly growing market (minimum 8% growth per year); and
- the labor costs are low even if this situation is changing in certain areas;
- with the development of the Western provinces, China offers new opportunities, particularly in the Sichuan province.

Nevertheless, certain factors can hinder investments, such as China’s lack of transparence, legal uncertainty, low level of protection of intellectual property rights, corruption or protectionist measures which privilege local businesses.


Country Comparison For the Protection of Investors

  China East Asia & Pacific United States Germany
Index of Transaction Transparency* 10.0 5.2 7.0 5.0
Index of Manager’s Responsibility** 1.0 4.5 9.0 5.0
Index of Shareholders’ Power*** 4.0 6.3 9.0 5.0
Index of Investor Protection**** 5.0 5.3 8.3 5.0

Source: Doing Business

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action. **** The Greater the Index, the Higher the Level of Investor Protection.

Foreign Direct Investment 2007 2008 2009
FDI Inward Flow (million USD) 83,521 108,312 95,000
FDI Stock (million USD) 327,087 378,083 473,083
Performance Index*, Ranking on 141 Economies 102 94 76
Potential Index**, Ranking on 141 Economies 32 30 -
Number of Greenfield Investments*** 1,214 1,515 1,143
FDI Inwards (in % of GFCF****) 6.0 5.3 37.0
FDI Stock (in % of GDP) 9.7 8.7 10.1

Source: UNCTAD

Note: * The UNCTAD Inward FDI Performance Index is Based on a Ratio of the Country's Share in Global FDI Inflows and its Share in Global GDP. ** The UNCTAD Inward FDI Potential Index is Based on 12 Economic and Structural Variables Such as GDP, Foreign Trade, FDI, Infrastructures, Energy Use, R&D, Education, Country Risk. *** Green Field Investments Are a Form of Foreign Direct Investment Where a Parent Company Starts a New Venture in a Foreign Country By Constructing New Operational Facilities From the Ground Up. **** Gross Fixed Capital Formation (GFCF) Measures the Value of Additions to Fixed Assets Purchased By Business, Government and Households Less Disposals of Fixed Assets Sold Off or Scrapped.

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Why You Should Choose to Invest in China

Strong Points
China has a rapidly expanding market, which was not overly affected by the 2008-2009 financial crisis. With a strong potential, a wealth of employees and potential partners eager to learn and evolve, the country is a base for low cost production.
Weak Points
A changing legal context, administrative complexity, the difficulty for foreigners to learn the way of conducting business, both culturally and in practice, a poor middle management level and a very high staff turnover are factors which are often crippling in market acquisition.
Government Measures to Motivate or Restrict FDI
In the foreign investment guide published by the State Commission for Development and Reform in November 2007, the Chinese government made it known that investments in sectors or Chinese companies that already have "a relatively strong production capacity with advanced technologies 'will not be encouraged', while investments in high technology, production of equipment and new materials, and in the services sectors, as well as in the recycling economy, clean production, use of renewable energies and environmental protection, will be welcomed as they are sectors in which China needs foreign companies.
Bilateral Investment Conventions Signed By China
China has signed bilateral agreements for investments with several countries.
To see the list of the countries, click here.
To see the conventions, click here.

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Procedures Relative to Foreign Investment

Freedom of Establishment
Varies according to the sector. Necessity to submit its 'business plan' for prior approval to setting up.
Acquisition of Holdings
The acquisition of majority interest in a local company is authorized in China according to the sectors.
Obligation to Declare
The agency for promotion of foreign investments in the country facilitates getting information on authorizations necessary for setting up.
Requests For Specific Authorizations
Necessity for all projects to submit a business plan subject to approval by competent authorities.
Find Investment Service Providers in China on

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Investment Opportunities

Investment Aid Agency
Invest in China
Tenders, Projects and Public Procurement
Chinabidding, Tenders in China
Tenders Info, Tenders in China
Asian Development Bank, Procurement Plans in Asia
DgMarket, Tenders Worldwide
Other Useful Resources
The heading dedicated to business opportunities of the Chinese agency for international investors

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