FDI into China

The Limited Potential of China’s Western Region

“Foreign Direct Investment in China is expected to reach US$100 billion in every year of the 11th Five-Year Plan period (2006-10)” (Annual 1). If history is any indication of the future, then China can expect biased distribution of these funds during the 11th Five-Year Plan. Attracting foreign direct investment is not an easy task. The region must possess a demanding consumer market, a developed infrastructure, and access to international markets. From 1983 to 2001 an estimated US$400 billion worth of FDI flowed into China. More specifically, “the eastern coastal region accounted for 88% of China’s total inflows of FDI, but the central region attracted just 9% and the western region little more than 3%”(Ogutcu 13). The Chinese government is not ignoring this problem. The government has in fact devised the “Western Development Strategy” (Xibu Da Kaifa), which it officially launched in January 2000; however, disparities still remain and will continue to remain until the western region can become more attractive to exorbitant inflows of foreign direct investment. Although foreign direct investment into China has provided rapid growth and prosperity along the coastal region, Chi

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While the “Western Development Strategy” is ambitious in scope, the western region will need constant attention and large capital investments for decades to come. The development of an efficient infrastructure seems to be the foremost concern of Chinese officials. Because of continuous consumer demand for new refrigerators, cars, and various material goods, a material driven economy is beginning to show exuberant signs of life. The People’s Daily stated that “ever since the nation began opening to the outside world in the late 70’s, coastal provinces such as Guangdong, Zhejiang, and Fujian have reaped the lion’s share of FDI thanks to their natural advantages”(Income).

Foreign Direct Investment in the Eastern Coastal Region

If a host country has a vast market size, an efficient infrastructure, and access to international markets, then it is a prime candidate for foreign direct investment. Sales of household electronic appliances like mobile phones, PCs, TV sets and DVD players posted a 62 per cent rise in the first three quarters” (Through). The concern is in regards to the numerous western region limitations. The demand for such developmental funds is obvious, but the actual funds from the foreign investors themselves will be hard to realize. However, the Chinese Government is fighting an uphill battle. Desert regions, vast plateaus, and uninhabitable plains all naturally stand between the western region and foreign direct investment.

The limitations posed by the western region. These recent figures prove that the western region continues to be ignored by foreign investors.

A county must have an efficient infrastructure to allow the free flow of consumers and resources. The non-coastal western region imposes significant challenges to the movement of goods to already structured consumer markets. The OECD reports that, “nearly 100 billion Yuan per year are due to be spent by the central government in the Western Region, financed by bond issues, bank loans and other investment” (2001b 10).

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