China

Investing

FDI in figures

Absorption of FDI flows involves opening of China abroad. China has become the most attractive country for FDI according to a report of Ernst& Young. China is an unexploited market and a potential of considerable growth.

Foreign Direct Investment	2004	2005	2006
FDI of inward flow (millions USD)	60,630	72,406	69,468
FDI inward stock (millions USD)	n.c.	n.c.	292,559.0
Performance Index*, world ranking	52	62	69
Potential Index**, world ranking	33	30	n.c.
Number of Greenfield investments	1,550	1,235	1,378
FDI inwards (in % of GFCF)	8.0	8.8	8.0
FDI stock (in % of GDP)	n.c.	n.c.	11.1

Source: UNCTAD, World Investment Report

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.

Why you should choose China

Strong points

Market which is growing strongly and has strong potential, employees and partners eager to learn and evolve, low cost production base, high rate of elimination of illiteracy for a country in this stage of development.

Weak points

Legal context, administrative complexity, difficulty of learning the business culture for the Westerners, failure at the middle management level and very significant turnover of personnel.

Government measures to motivate or restrict FDI

The Chinese government has informed in the guide on overseas investments published by the State Commission for Development and Reform, in November 2007, that investments in sectors where Chinese companies already have "a relatively strong production capacity with ready technologies" "will not be encouraged", whereas the high tech , production of equipments and new materials, the services sector, as well as the promotion of savings of recycling, the appropriate production, the use of renewable energies and the protection of environment, sectors in which China requires foreign companies, are welcome.

On the reading this handbook, it becomes clear that the rules for foreigners and locals are different and that, by reading between the lines, overseas investments are welcome in China as much as required by China, and despite commitments entered within the framework of OMC in 2001, and despite the pressures of the Western business world. Foreign companies may be tolerated in China, as long as China requires them, and that the rules change drastically at the moment when the requirement is no longer there.

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.

Administrative 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.
Competent organization for the declaration
Requests for specific authorizations: Necessity for all projects to submit a business plan subject to approval by competent authorities.