Legal and operational aspects of direct foreign investment in China

This thesis examines the utilization of direct foreign investment (DFI) in China. In a sovereign state in which laws and regulations safeguard the interests of both the host country and foreign investors, direct foreign investment can serve many useful purposes. By utilizing DFI, an economically less developed country can benefit from foreign capital, technology and managerial skills. Mobilization of external resources can be particularly important to a country which was previously isolated from the outside world. The dynamic impacts of DFI in a country such as China go beyond the benefits measured by static economic indicators.; Current Chinese foreign investment policy encourages export-oriented foreign enterprises and high technology enterprises. One purpose of this thesis is to show that China's economic conditions and the policy objectives inherent in its legal structure are very attractive to export-oriented foreign enterprises which produce labour intensive products. Whereas these enterprises from newly industrialized countries and regions are relatively small in scale, they have contributed greatly to the improvement of China's economy in general and its balance of payment position in particular. While China's market and its rapid economic growth rate are very attractive to multinational corporations, the present economic conditions and other constraints inherent in its legal framework create many difficulties for these foreign enterprises. The survey of foreign enterprises from Hong Kong and other developed countries shows these differences.; The main purpose of this thesis is, however, to examine China's foreign investment laws and regulations. While the scope of these foreign investment laws and regulations is extensive, the thesis focuses on the inducements provided to foreign enterprises, foreign exchange regulations, provisions for the protection of proprietary interests in technology, labour regulations, and investment dispute settlement mechanisms. In addition to the analysis of the characteristics of the laws and regulations in these areas, legal problems in the laws pertaining to investment are examined, and the impact of these laws and regulations is examined. The thesis will show also that the foreign investment laws and regulations appear to reflect China's trade and industrial policies, which are intended to exploit its comparative advantage in producing labour intensive products and in adjusting to its potential comparative advantage in manufacturing technology or knowledge-intensive products.; The thesis examines also some non-legal factors which affect foreign investment in China which are of considerable importance to foreign investors' investment decisions. These non-legal factors can exert great impact on the operation of foreign enterprises in the Chinese economy. Several chapters have been devoted to the discussion of these non-legal factors and their impact on different foreign enterprises.