JSPES, Vol. 34, No. 3 (Fall 2009)
pp. 275-289

China and Foreign Direct Investment: Market-Oriented Policies and FDI Inflows

Shah M. Tarzi

Institute of International Studies, Bradley University

China’s rapid rise to economic prominence was made possible by its ability to attract foreign private investment and technology. This study illuminates the evolution and vital impact of China’s foreign direct investment policy regime. China’s market–oriented reforms reduced barriers to foreign investment and various measures of preferential treatment and liberalization were key drivers of FDI inflows. A profile of foreign direct investment in China is followed by a discussion of key laws and government legislation designed to attract foreign investment into China. A major finding of this study is that public policies in the form of market-oriented reforms, policy credibility and institutions to implement liberalization policies matter a great deal. ‘Special Economic Zones’ played a vital role in China’s drive to create a receptive environment for foreign investors.