An analysis of the Chinese inward FDI development and regulation policy and the Five-Year Plans

MARQUES, TOMÁS COSTA DE AZEVEDO; SCHUTTE, GIORGIO ROMANO

doi:10.1590/0101-31572024-3564

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Articles • Brazil. J. Polit. Econ. 44 (2) • Apr-Jun 2024 • https://doi.org/10.1590/0101-31572024-3564 copy

An analysis of the Chinese inward FDI development and regulation policy and the Five-Year Plans^* * We would like to thank Alfredo Saad-Filho, Dic-Lo, Sam Kee Cheng, Elias Jabbour, Demétrio Toledo Isabela Nogueira de Moraes and Eleonora Natale for their assistance with this research. Any mistakes here are ours.

Uma análise da política chinesa de desenvolvimento e regulação do IDE interno e dos Planos Quinquenais

Authorship SCIMAGO INSTITUTIONS RANKINGS

ABSTRACT

At the end of the 1970s, the People’s Republic of China (PRC) promoted policies to attract investments from the developed capitalist world, aiming for technological transfer and offering a profitable environment in exchange. Although the TNC capital, know-how, and technology have been key factors for Chinese development, the State has planned and regulated those investments, so they can be aligned with an autonomous project of development, avoiding the classic centre-periphery dependency relationship. This paper analysis focuses on the Five-Year Plans, and the regulation policy laws for inward investment. At the end we analyse the FDI data, which allowed us to identify the main changes and distinct phases of the development of FDI and the State policy.

KEYWORDS:
FDI; development policy; state and markets; five-years plan

Years	Plan	Political guideline	Main Guidelines for FDI
1978-1985	5th+6th	Deng Xiaoping ‘It doesn’t matter whether a cat is white or black, as long as it catches mice. (1978-1992)	I. Introducing the Open Door Policy; II. Regulating Foreign Invested Enterprises (FIE); III. Use foreign capital to meet domestic needs; IV. Targeting agricultural reforms.
1986-1990	7th		I. Reform and development are adapted to and promote each other; II. Produce some mid-technology products domestically following the developed countries norms and standards. III. SEZ as a development tool to spread managerial knowledge and technology; IV. Improve the capacity of export and to promote import substitution.
1991-1995	8th
1991-1995	8th	Jiang Zemin’s ‘Three Represents’ (1) advanced of social productive forces (Economic production); (2) progressive course of China’s advanced culture (Cultural development) and (3) fundamental interests of the majority (Political consensus) (1993-2003)
1996-2000	9th		I. Open wider to the outside world; II. Gradually open the domestic market.
2001-2005	10th		I. Focus on the development of the service industry; II. Expand SEZ and use it as a development tool in the Western regions; III. Share and sell State owned Enterprises that are not considered strategic; IV. Prepare China for the entry in the WTO.
2001-2005	10th	Hu Jintao ‘Scientific Outlook Development’, promote development putting people first (2003-2013)
2006-2010	11th		I. Win-win strategy opening strategy; II. Focus on the development of the national High-tech industry; III. Formation of domestic leading and competitive industries; IV. Guide the FDI for national strategic interests.
2011-2015	12th		I. Deeper opening-up; II. Promote FDI in less developed areas of West and bordering; III. Expand leading industries for foreign investors; IV. Opening-up’ policies’ connecting with neighbouring countries. V. Integrate into global innovation and develop a new generation of IT.
2011-2015	12th	Xi Jinping (2013-2028)
2016-2020	13th		I. Improving developing socialism with Chinese characteristics; II. Shared development; III. Development with door open; IV. Bringing in and going global.
2021-2025	14th		I. Promote fair competition; II. Open more sectors for FDI.

Years	Key Laws	Main Guidelines	Main Objective
1979	Law of the People’s Republic of China on Joint Ventures Using Chinese and Foreign Investment	I. Equity Joint Venture investment; II. At least 25% of foreign investment; III. At least 25% of Chinese participation; IV. Use of advanced technology; V. Encouraged to export.	Regulate IFDI, delimiting its form and conditions.
1979	Special Economic Zones (SEZ)	I. Implement areas in the mainland for the entrance of FDI; II. These areas have preferential treatment as tax incentives; III. It should establish strong backward and forward linkages.	Promote the development of underdevelopment regions, absorbing advanced technology and diffusing knowledge.
1983	Implementing Regulations of the Law of the People’s Republic of China on Chinese-Foreign Equity Joint Venture	I. Obligation to adopt advanced technology and methods; II. Increase the variety of products and rise quantity and quality; III. Expand export and/or train technical and managerial personnel; IV. The Chairman must be Chinese.	Facilitate the implementation of the EJV Venture Law.
1984	Economic and Technical Development Zones (ETDZ)	Same as SEZ but with more tax incentives for the higher-technology industry.	Attract investments in the higher-technology industry.
1986	Provisions of the State Council of the People’s Republic of China for the Encouragement of Foreign Investment	I. Discriminate preferential tax; II. Exempt tax of import of machinery and equipment used in industries that produce to export; III. Allow remittance of profit without an income tax for industries using high technology.	Complement the EJV Law and the EJV Implementing Regulation Law.
1986	Law of the PRC on Enterprises Operated Exclusively with Foreign Capital	I. Must be conducive to the development of PRC; II. Use advanced technology; II. Equipment or market all or most of their production outside of PRC.	Expand economic cooperation and technological exchange with foreign countries.
1988	Regulation to Encourage Investments by Taiwanese Compatriots	I. Equal treatment for investments from Taiwan as those applied to foreign investments; II. More rights in acquisitions and investments compared to foreign investors.	Promote economic and technological exchanges benefiting mutual prosperity.
1988	Law of the People’s Republic of China on Chinese-Foreign Cooperative Joint Ventures	I. Limited liability Company; II. Distributions of profit are negotiated between parts; III. Encourage export-oriented or technologically advanced industries.	Expand economically, cooperation and technological exchange with foreign countries.
1990	Detailed Rules for the Implementation of the Law of the PRC on Wholly Foreign-Owned Enterprises	I. Use of own capital; II. It must be shown to be beneficial to the development of the national economy using advanced technology or exporting most part of production.	Expand economic cooperation and technological exchange with foreign countries.
1990	Provisions of the State Council Concerning the Encouragement of Investments by Overseas Chinese and Compatriots from Hong Kong and Macao	Similar treatment as promulgated by the law for Taiwanese investments.	Promote economic and technological exchanges benefiting mutual prosperity.
1995	Provisional Regulations on Direction Guide to Foreign Investment	I. Guide for FDI, dividing them in four categories; II. Create priorities and restricted sectors for FDI; III. Constantly updated, changing sectors and categories of which sector.	Give directions and control the destiny of FDI in accordance with government planning and interest.
2003	Interim Provisions on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors	I. The M&A process shall be approved by the approval organ; II. In special cases that can be considered key economic issues, should be reported to MOFCOM and State Administration for Industry and Commerce.	Regulate M&A.
2008	Anti-Monopoly Law	I. Describes and characterises monopolistic conduct; II. It points out cases in which the responsible bodies take measures to intervene in the market.	Protect fair competition in the market promoting the healthy development of the socialist market economy.
2019	The Foreign Investment Law of the People’s Republic of China (The New Foreign Investment Law)	I. Promote foreign investment; II. FIE receives national treatment under the Company Law.	Replace the EJV Law, WFOE Law, and the CJV Law.

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[1] The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.