From East to West: The Evolution of China’s FDI Preferential Policies

Abstract

Since 1978, China has gradually opened up and has successfully used its foreign direct investment (FDI) preferential policies to steer FDI into its desired locations and industries in order to facilitate its uneven development strategy. The unbalanced strategy initially gave development priority to China’s eastern coastal region in hopes of establishing viable and strong economic “engines” along the coast and thus spreading out positive effects into its vast interior areas. China’s FDI favored policies, reflecting this strategy, were accordingly skewed to the eastern region in the first 20 years, from 1978 to 1997. This uneven growth distribution has been clearly manifested by the disproportionate FDI concentration in China’s coastal area. It is estimated that over 85% of FDI in the period of 1978-1998 has been located in the eastern coastal region while merely 3% in the western area.