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Utilizing Foreign Capital

China utilizes foreign capital through various channels and forms, which fall into three major categories: 1) foreign loans, including loans from foreign governments, international financial organizations and foreign commercial banks, export credits, and issuance of bonds overseas; 2) direct foreign investment, including Chinese-foreign equity joint ventures, Chinese-foreign cooperative joint ventures, wholly foreign-owned enterprises and Chinese-foreign cooperative development projects; 3) other foreign investments, including international leasing, compensation trade, processing and assembly and issuing stocks overseas. From 1990 to 2001, foreign capital utilized by China in real terms totaled US$510.8 billion, including US$378 billion of direct investments by foreign businesspeople. In 2002, foreign capital utilized by China in real terms came to US$55 billion, ranking the country first in absorbing foreign capital in the world for the first time. In 2003, although China was hit by the outbreak of SARS in the first half of the year, foreign investment still maintained its momentum of rapid increase, and foreign capital utilized in real terms for the year totaled US$56.1 billion.

Since the 1980s, China has put in a great amount of human, material and financial resources to construct infrastructure facilities to help create a favorable environment for foreign investors to invest in China. The National People's Congress and the State Council have promulgated more than 500 foreign-related economic laws and regulations to provide legal and other guarantees for foreign investor in China. At the end of 1997, China revised and promulgated the Foreign Investment Industrial Guidance Catalogue to encourage and support foreign business people to invest in the comprehensive development of agriculture, energy, communications, important raw and processed materials, new and high technology, the comprehensive utilization of resources, and environmental protection.


In accordance with the rules of the WTO and China's promise, China has basically completed the sorting out and revision of foreign-related economic laws and regulations. A foreign-investment law system with the Law on Chinese-Foreign Equity Joint Ventures, the Law on Chinese-Foreign Cooperative Joint Ventures, the Law on Foreign Investment Enterprises and the relevant rules for the implementation of these laws — as the mainstay has been formed, setting the groundwork for China to provide the best investment environment for investors and financial circles around the world. In April 2004, China passed an amendment to the Foreign Trade Law that includes clauses to foster fair trade such as those aimed at protecting intellectual property rights of both domestic and foreign property owners in trade and allowing individuals to be operators of foreign trade. By the end of 2003, foreign business people from more than 170 countries and regions had invested in China, with a total of 465,000 foreign-invested enterprises. Of the 500 top transnational companies in the world, over 400 have invested in China.

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