Chinese political and economic system and China’s policies on foreign investment.

During the past three decades, China has achieved impressive economic growth after its economic reform in 1978. The Chinese liberalization was gradual, according to transition strategy carried out by China in its economic reform process; the opening to the foreign investment has been developed in a gradual and experimental way.

During the reform process, the foreign investment was employed as an economic development accelerator, developing the economy by using foreign capital. The outcome suggests that the impact of foreign investment on economic growth is positive and statistically significant. The level of development of financial markets shows beneficial effect on economic growth. The liberalization of financial market benefits economic growth, besides it improves the economic growth enhance effect of foreign investment. Restrictions on foreign investment in telecommunications, the internet, culture, and education sectors would be opened. This foreign investment has contributed to China’s flourishing economy.

There are non-discriminatory incentives offered to domestic and foreign investors, including those to attract investment to the Central and Western Regions. The main change would be the abolition of the restrictions. The policy of becoming a global economy has been highly successful because it has achieved a huge acceleration in China’s foreign investment. The country is now one of the world’s largest exporters of capital. This investment outflow has become more sectorally and geographically diversified, and is no longer limited to state-owned enterprises. These flows can be of great benefit to China and the rest of the world, expanding capital to sustain global growth, while also bringing other, benefits such as promoting innovation and cultural interchange. The central government has played the main role in promoting foreign investment by setting out the global policy goal in unambiguous terms and by gradually reducing restrictions allocating credit for major outward investments and providing information about host countries. The outward investment is a well-established trend; the government may wish to consider making improvements to the institutional framework for foreign investments, reducing remaining bureaucratic obstacles, especially the examination and approval process, and improving information.

Five-Year Plan
China defines its economic goals through five-year macro-economic plans. There is a promise to guide more foreign investment to an identified set of strategic and newly emerging industries, biotechnology, advanced equipment manufacturing, new energy sector, new materials, and new-energy vehicles, while limiting environmentally damaging industries; encourage foreign multinationals and research and development centers in China; encourage foreign investment in production.
A major goal of China’s investment policies is to encourage the domestic development of technology and know-how. China’s investment authorities tend to look favorably on investments that transfer technology. China seeks to promote investment in higher value-added sectors, including high technology research and development, advanced manufacturing, clean energy technology, and select services sectors. Foreign investors often must weigh the potential value of accessing China’s market.
China also seeks to spread the benefits of foreign investment by encouraging foreign companies to establish regional head office and operations in Central, Western, and Northeastern China.

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