The role of the State on foreign direct investment regulation in China
Abstract
This article intends to corroborate the argument advocated by heterodox
economists such as Akyüz, Chang and Furtado that state regulation is crucial to extracting
the possible benefits of foreign direct investment (FDI). We do so by analyzing the policies
used by China since its opening to this type of investment in 1979. The article innovates by
scrutinizing China’s major FDI laws, regulations and guidelines that compose the formal
framework under which foreign-owned enterprises have operated in the country for almost
40 years. We then address the traditional view that China developed simply because it
increasingly opened its market to foreign investment and adopted a foreign investment-led
growth model. We argue that it was because of this strong regulation that FDI had such
a positive effect, contributing to technological transfer and trade expansion, although not
defining the ratio of capital accumulation.
JEL Classification: O16.
Keywords: Foreign direct investment regulation China