After the Third Plenary Session of the Eleventh Central Committee of the Chinese Communist Party in 1978, Mainland China began using foreign investment to serve her socialist modernization. Mainland China set up 4 special economic zones and opened up 14 coastal cities and also Hainan Island in order to extend her external economic relations. Many laws and regulations concerning the utilization of foreign capital have now been formulated. Investment protection agreements have been signed by Mainland China with a number of countries. Remarkable progress has been made in utilizing foreign funds since 1984.
From 1979 to 1985, the planned utilization of foreign capital in various forms in Mainland China totalled US$36.02 billion; of this amount, foreign loans came to US$19.84 billion and direct foreign investment made up the balance of US$16.18 billion. The proportion of loans fell, but, because of Mainland China’s policy and encouragement, the proportion of direct foreign investment has increased in the past few years. By the end of 1985, the actual foreign capital used had amounted to US$21.63 billion, which corresponded to 10% of the total sum of domestic capital investment for the same period.
The main sources of loans were the World Bank and the Japanese government, the funds being chiefly used for energy and transportation projects. Direct investment in enterprises was undertaken mainly by businessmen from Hong Kong, followed by the United States and Japan. Most of these enterprises are located in the coastal areas and have chiefly invested in energy, petro-chemicals, transportation, electronics, machine-building, textiles, light industries, building materials, the metallurgical industry and the tourist industry.
At present, Mainland China’s environment and conditions for investment have improved and the loan credit indices indicate that her level of debt remains modest. Mainland China’s utilization of foreign capital has made considerable advances. However, these investments still fall short of the needs of the national socialist modernization drive, and greater efforts will be necessary in the future.
