China’s utilization of foreign capital

Chapter1:thenewstageofChina’suseofforeigncapital
Chapter2:theproblemsandcountermeasuresofChina’sutilizationofforeigncapital
Section2MajorCountermeasureWhichShouldbeAdoptedCurrently
Section1:Currentmajorproblemsofutilizationofforeigncapital
Chapter3:thenewthoughtsofutilizingforeigncapital
Chapter4:theestimationofChinaattractingtheforeigncapitalin2002

Chapter1:thenewstageofChina’suseofforeigncapital
Before1989,Chinatakesadvantagesofherpreferentialpoliciestoattractforeign
capitalsbutformanyreasons,thescaleofforeigncapitalsisquitesmall,After1992,
DengXiaoping'ssouthcruise,theforeigncapitalbegantoflowintoChinainlarge-scale.Thereasonisthattheprofitsofenterprisesdecreased,themarketshankand
thecommoditypricewentdown,whichresultedformtheslackofChineseeconomyform
1989to1992.Inordertogetoutofthedeepend,thealltheenterprise,theenterprises
expectedtorefreshthetechniqu esandoffermorenewproductstoquicklycapturethemarket,andsurvivedanddeveloped
throughthedifferenceofsystemandprice,particularlythepreferentialtreatment.
Therefore，foreigncapitalswerestronglyneeded（alsoresultedformthedifferenceofinternalandexternalpolicies）,whiletheexpanding
ofinfluxofforeigncapitalsintoChinahappened.Thisstagedidn’tenduntil1997.Inthisstage,thejointventurestartedcompetingintensively(primarily
fortechnique,marketsharesandnon-pricefactors)inChinesemarket,andledtothematurityofChinesemarketcomp etition.
Theutilizationoftheforeigncapitalhasalreadyenteredanewstageregardingfinancial
crisisinAsia,whichissymbolizedbythefollowings
1.Thepercentageofforeigncapitaloverthewholeinvestmentdecreases,andhascome
intoalowpercentperiod.Meanwhile,theneedofforeigncapitalissaturated.After1992,
despitethatTheutilizationoftheforeigncapitalhasalreadyenteredanewstage,the
peakis1994whenthepercentageofforeigncapitalovertotalinvestmentwasabout22.
75%,henceforththepercentgraduallydescended.Thisshowedthattheneedofforeign
capitalinChinesemarkethadbeenrelativelysaturatedorbalanced.In1997and1998，theamountofFDIwasbasically about45billionUSD,whichprovedthatthecapacityofChinesemarketofforeigncapital

waslimitedandthemarketreallydidnotneedtoomuchforeigncapital.(Localpolicies
andsubjectivewishesareotheraspects).Wecanalsofindthatthedecreasingofforeign
capitalfromtheintensivedecreasingoftheproportionofforeigncapitaloverthetotal
socialinvestment.Theproportionofforeigncapitalwas20.66%in1995,butin1996the
proportionsuddenlydecreasedto14.65%withoutanyadjustingofgovernmental
policies,whichwasobviouslyresultedformthe changingofChinesemarket.Thefigurewas14.79%in1997and13.11%in1998,which
indicatedthatthescaleofforeigncapitalandtotalsocialinvestmenthadbeenfixedon
andthemarketlackedtheeitherinvestingmomentumorneedforforeigncapital.
However,thecompetitionofpricebetweenenterprisesbeginningform1997suggested
thechangingofmarketnecessarilyresultedtothedecreasingofdomesticandforeign
investmentsfromanotheranglebecausethemarkethadenteredtheperiodofdeclining
orstabilization.Theamountoftheutilizationofforeignca pitalin1999was40.4billionUSD,decreasing11.4%overthepreviousyearbutthetotal
investmentinChinawas2.9876trillionRMB,increasing5.2%overthepreviousyear.The
proportionofforeigncapitalwas11.2%,fallingbehind13.48%,theproportionof1992,
andonlyabouthalfofthehighestproportionin1994.Thisprovedthattheneedfor
domesticcapitalexceededthatofforeigncapital,andthenewchanginghademergedin
utilizationofforeigncapital(includingtheadjustingofsomepolicies).Whiletheproportion
offoreigncapitalwaslowerthan thatof1992,theutilizationofforeigncapitalhasalreadyenteredthenewstageof
stableordecreasingscale.