Attracting direct foreign investment is an essential component of the cardinal state policy of opening up and reform. China has made globally recognized achievements in attracting foreign investment since its reform and opening up. Since 1993 China has remained No. l destination for foreign investment among developing countries for seven years running. During the Eighth (1991-1995) and Ninth Five-Year Plan periods, the work of attracting foreign investment entered a new state, which featured high speed, large scale, and improved industrial structure and utilization of the investment.

　　Direct foreign investment has played a positive role in promoting China‘s economic development and opening up and reform. The contributions of foreign investment are as follows:

　　1). Bringing about rapid and sound development of the national economy. From 1996 to 2000, China cumulatively approved 104,621 foreign-invested enterprises, with a total foreign commitment of US$279.984 billion, of which US$213.480 billion was utilized, accounting for 28.75 percent, 41.41 percent and 61.28 percent of their respective total for the past 20 years since China‘s reform and opening up. The realized input of foreign investors accounted for 12.72 percent of China‘s total investment in fixed assets for the same period. The increased value of foreign-invested enterprises (this statistic started in 1998) reached 1,336.9 billion yuan (1998-2000), accounting for 20.87 percent of China‘s industrial increased value of the same period. The taxes derived from foreign-invested enterprises (exclusive of tariffs and land-use fees) amounted to 683.6 billion yuan, accounting for 12.54 percent of China‘s total industrial and commercial tax income, making these enterprises the fastest growing tax source since 1992. Foreign-invested enterprises have maintained as a whole a favorable foreign exchange balance, contributing to the improvement of balance of payment and stable increase of China‘s foreign exchange reserve. Currently, about 180,000 foreign-invested enterprises are in operation, employing around 20 million people, equivalent to 10 percent of China‘s non-agriculture labor force. Foreign-invested enterprises have become a key component, an increase point and a driving force of China‘s national economy.

　　2). Propelling emancipation of the mind, renovation of modes of thinking, reform in China‘s economic system and formation of China‘s market economy system. The inflow of foreign investment has brought in with it brand new business concepts and advanced managerial methods, and has helped break the traditional economic mold and injected vitality to the old economic system.

　　3). Introducing into China advanced and applicable technologies and managerial know-how, and accelerating the readjustment of economic structure and optimization of industrial structure. The advanced technologies, skills, equipment and products imported by foreign-invested enterprises have advanced the technological innovation of Chinese industries, and speeded up the readjustment of China‘s industrial structure and product patterns. The absorbed foreign investment has helped upgrade the products and improve the technology and production technique of Chinese industries, including machinery, electronics, communications, automobile, chemistry, light industry, textile, building materials, medicine and foodstuff. On the strength of foreign investment, some sectors have forged a number of new- and hi-tech industries in a short period, narrowing the gap between China and advanced countries in terms of product and technology. In the sectors concentrated with foreign investment, the foreign-invested enterprises excel their domestic counterparts in all key performance indexes.

　　4). Accelerating the integration of Chinese economy into the world economy, and promoting the establishment and development of an open economy. Foreign investment has helped sharpen the edge of China‘s import and export products in international competition, broaden the trade channels and speed up the growth of import and export trade. Since 1996 the export volume of foreign- invested enterprises has continued to account for above 40 percent of China‘s total export value. For the period from 1996 to 2000 the import and export value of foreign-invested enterprises stood at US$858.634 billion, making up nearly 50 percent of China‘s total foreign trade. The continuous import and export increase of foreign-invested enterprises has much bearing on the improvement of China‘s trade environment and balance between China‘s import and export.


　　5). Promoting China‘s bilateral and multilateral trade relations.