Changes Predicted of Foreign Investment After China's WTO Entry

After China's WTO entry three changes are predicted of foreign capital flowing into China in investment, according to Yu Weixiang, chairman of WTO Research Center under State Economic and Trade Commission.

Yu said that global investment will continue to grow in coming five years, large amounts of transnational capital flowing in will provide favorable condition for China in attracting foreign funds. Transnational purchase and acquisition, as chief forms of direct investment since 1995, have come to take up over 85 percent. In contrast, China's market system is not mature enough, relevant laws and regulations are not complete either, 70 percent of foreign investment flowing in are absorbed by way of joint ventures or cooperation, and few are adopted by global merger, which has hindered the roll-in of foreign investment. In view of this, during a short period of time, foreign investment in China will continue to increase but will not have a too large amount as it should be.

Yu said that of foreign investment flow in during the past 20 odd years since China's reform, over 80 percent are lured by means of"markets for technology"strategy, with funds distributed mainly in such sectors as of tariff and non-tariff protection industries like auto, chemical industry and electronics. After China's accession to WTO, as control on tariff and non-tariff protection is to be relaxed, commodity exports may become another choice for foreign investors. Part of foreign-funded companies in China may adjust their business tactics from direct investment to commodity exports.

Yu said that China would gradually open up its Telecom, finance, insurance and its new technology sectors after WTO entry, which would suck up more foreign funds. While Europe, America, Japan and other developed countries possess great advantages in these fields, investment proportion will increase by a big margin. Small enterprises in Hong Kong, Macao and Taiwan would not be their rivals. As China will implement a national treatment policy after WTO entry, investment by those enterprises would see a decrease. Yu concluded that foreign investment and investment amount flowing into China will make a great change in a long-term run.



By PD Online staff member Li Yan


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