Foreign Investment in China 1978-1992

Abstract

This research provides a comprehensive analysis of the development of foreign investment in China between 1978 and 1992, when China began implementing a policy of economic and opening up reform following the December 1978 meeting of the Central Committee of the Communist Party of China (CPC), led by Deng Xiaoping. This policy represented a radical shift in economic approach, as China moved from a closed, centralized economy to one that was open to the global market. Since 1979, the first law regulating foreign investment was passed and special economic zones were established in cities such as Shenzhen, Zhuhai, Shantou, and Xiamen, leading to an influx of foreign capital into the country. Between 1984 and 1988, China expanded these policies to include coastal areas and other large cities, increasing investment opportunities and opening up new sectors to foreign investors, especially light industry and electronics. In the early 1990s, specifically in 1992, with Deng Xiaoping's visit to southern China, the importance of continuing the openness policy was reemphasized, leading to an increase in the volume of foreign direct investment. This phase was characterized by a significant increase in the number of multinational companies operating in China, such as: IBM, Pepsi Co, Samsung, General Motors, McDonald's and others, which contributed to the development of industrial infrastructure and the transfer of modern technology. The research also mentioned the challenges faced by these investments, such as weak intellectual property protection, administrative restrictions, high operating costs, domestic competition, and international trade tensions, especially with the U.S. It also discussed the impact of Chinese investments on neighboring countries such as Vietnam, Malaysia, Indonesia, and Thailand, which in turn began adopting similar policies to attract investments. In conclusion, the research shows that the period 1978-1992 was a pivotal one in China's economic history, laying the foundations for China's transformation into a global economic power, and proving that open reform policies and a stimulating investment environment are capable of achieving inclusive and sustainable economic growth.