Foreign Investment and Evolving Security Concerns: The Case of China

Foreign investment has played pivotal roles in China’s overall economic growth over the last several decades, but for different reasons and with varying intensity. In this chapter, we focus mainly on inward foreign direct investment (FDI) and perform three tasks. First, we provide an overview of the foreign investments that have entered China since economic and market liberalization and internationalization reforms started in the late 1970s. Second, we consider inward FDI with regard to sectoral distribution, where most investments come from, and which sectors are more popular among foreign investors. Third, we discuss Chinese FDI policies and regulations with focus on motivations and seek to explain that although China has changed its regulatory measures considerably over the years, it has remained relatively restrictive and selective in terms of which sectors and types of investments have been, and are still, open for foreign investment.