China's Utilization Of Foreign Investment Policy Adjustments And Impact Analysis

Since the reform and opening-up, foreign investments have played important roles in promoting China's economic development. But many negative effects have arisen as well. This paper first analyzes the unfavorable impacts of the inflow of foreign investments on upgrade of industrial structures, balance of payments, industrial monopoly and the development of civil industries and environment. Then combining the function orientation and object orientation of foreign investment strategy, it raises the suggestions of adjusting foreign investment strategies as follows: Unifying foreign-funded corporation and domestic corporation income tax law in order to ensure a fair and justicial market environment. Preferential policies should be changed from ownership inclination into industries and regions inclination, through implementing differential policies of attracting foreign investments to promote industrial upgrade and regional development more evenly. Adjusting the source structure and improving the quality of foreign investment through setting up technological standards and environmental standards.In addition, this paper examines the impact of such policy adjustment. From the aspect of the scale of investment inflow, the negative effects of canceling super national treatment on foreign investment will be offset by the positive effects of China's more open market and favorable economic growth, therefore, it has little impact on the scale. However, it has great impacts on industrial structures and source structures of foreign investment. The ratio of foreign investment in primary and tertiary industries will rise, but the second industry still dominates. Among the second industry, the scale of foreign investment in the Labor-intensive Industries will descend. The number of Mid-Western regions'foreign investment will rise, whereas eastern region still find itself in a leading position. The scale of foreign investment from free port zones, Hongkong and Taiwan will drop, while which from European and American MNCs will rise. The investment strategy of MNCs in China will change as well. It will change from utilizing cheap resources and snatching international market into pulling off the globalization and systemization of their multi-national investment strategy.