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FDI inflows into China 1984-2009
The rise of foreign direct investment (FDI)
During the Mao period (1949-1976), China spurned foreign investment and paid back all its foreign loans (mostly to the Soviet Union) by 1965.
After taking over economic policy at the end of 1978, Deng Xiaoping opened up China to foreign trade and investment and in the early 1980s the first Special Economic Zones were set up to absorb direct investment from Hong Kong and elsewhere.
During the 1980s, FDI inflows grew steadily but remained relatively low, confined largely to joint ventures with Chinese state-owned enterprises. After the Beijing Massacre in 1989, western and Japanese companies withheld investment in China, but the momentum was maintained, partly by a new influx of capital from Taiwan.
Deng Xiaoping toured Guangdong and Shanghai in early 1992, encouraging a further and much more massive wave of foreign direct investment, increasingly in the form of wholly-owned subsidiaries of foreign companies, which contributed towards an acceleration in GDP growth and inflation. FDI inflows peaked at over US$45bn a year in 1997-98.
A further surge in FDI preceded and accompanied China's accession to the World Trade Organisation (WTO) in December 2001, promoting China to top position as an FDI destination in 2003.
In the early 1990s, contracted FDI exceeded actually used FDI by a large margin. This gap narrowed in the second half of the decade as the authorities became more realistic in registering inflows and as the pace of increase slowed, but it has widened again sharply in recent years. By 2003 contracted FDI was more than double utilised FDI.