Abstract
This chapter describes background on foreign direct investment in China. It provides an overview of foreign direct investment in the world and begins by the characteristics of foreign direct investment in China. The chapter illustrates what is occurring, especially with respect to emerging policy changes. Foreign direct investment (FDI) has been growing rapidly. It is increasing even faster than international trade, which have been the primary mechanism linking national economies. FDI performance is measured in multiple dimensions comprising aftertax returns on assets, sales growth, competitive position in the market, and overall performance. Since economic liberalization was initiated in 1979, China has taken great strides in attracting FDI. The rapid growth of FDI flow has given a tremendous boost to the development of the national economy. China is moving towards national treatment - an effort to level the playing field for domestic and foreign firms and facilitate its entry into the World Trade Organization.