Winners and Losers

Since its open-door policy began in 1978, China has attracted tremendous amounts of foreign direct investment (FDI) because of the sheer size of its potential market and its tax-incentive policy. The market-oriented reforms and opening-up policy pursued by China have produced high economic growth and dramatic economic transformation. The magnitude of flows of foreign investment and their contribution to the Chinese economy is discussed and assessed by examining key trends and characteristics of FDI in China. Some challenges and caveats that these firms must face in China are then outlined. As a result, foreign firms need to formulate their investment strategies to overcome these challenges when they do business in China.