Foreign Direct Investment in China

China's increasing openness to foreign direct investment (FDI) has contributed importantly to its exceptional growth performance. This paper examines China's experience with FDI and identifies some lessons for other countries. Most of the factors explaining China's success have also been important in attracting FDI to other countries: market size, labor costs, quality of infrastructure, and government policies. FDI has contributed to higher investment and productivity growth, and has created jobs and a dynamic export sector. China's success, however, did not come without some pitfalls: an increasingly complex tax incentive system and growing regional income disparities. Accession to the WTO should broaden China's "opening up" policies and continue FDI's contributions to China's economy in the future.Foreign direct investment;fdi, foreign investors, direct investment, foreign investment, investors, tax incentives, economic zones, joint ventures, tax incentive, market size, profit remittances, investment decisions, tax regime, special economic zones, foreign ownership, foreign companies, foreign trade, investment policies, foreign participation, international investment, foreign exchange, foreign enterprises, international investors, foreign capital, investment climate, foreign banks, high-technology industries, manufacturing sectors, tax liability, taxable income, foreign invested enterprises, technology transfer, host country, foreign partner, manufacturing sector, rate of return, tax system, market access, free trade areas