The Opportunities and Challenges Caused by Foreign Capital Entering China
ABSTRACT
It is undoubted that international capital always goes to the market of high rate of return, while the whole world has come to a consensus that China is now the most potential and most attractive market. Since 2002, China has become the top destination for foreign direct investment. Foreign capital not only accelerated the initial development of our economy, but also advanced high technology, enriched our managerial experience, promoted foreign trade and speeded up the economic restructuring, which enabled China’s industrial elements integrated into the world. In comparison with other developing countries, foreign capital, the double-edged sword, has brought China's economy both opportunities and challenges. Foreign capital has penetrated into nearly every industry and even controlled some of our key industries. And too much hot money in China has trapped some enterprises and some industries into depending excessively on it and it may even threaten our financial stability. Based on the analysis on the historical and current situation of China's utilization of foreign capital, both opportunities and challenges, proper solutions are put forward in this paper
Key words：foreign capital opportunities challenges
ABSTRACT I
摘 要 II
1 Introduction 1
2 A Brief History of Foreign Capital Investing in China 2
3 Opportunities 4
3.1 The Top Destination for Foreign Capital 4
3.2 Influences on China’s economy 4
3.2.1 Accelerate the Initial Development of the Economy 4
3.2.2 Promote the Development of Advanced Technologies 6
3.2.3 Enrich Managerial Experience 6
3.2.4 Strengthen Foreign Trade 7
3.3 Push the Economic Restructuring 8
3.4 Improve China’s International Status 9
3.4.1 A Driving Force for China’s Overseas Investment 9
3.4.2 “Made in China” Brings China Reputation 10
4 Challenges 12
4.1 Challenges to Financial Sector 12
4.1.1 Challenges to Financial Stability 12
4.1.2 Challenges to Financial Regulation 13
4.1.3 Over-dependence on Foreign Capital 13
4.1.4 Monopolize Some Key Industries 14
4.1.5 Cause Bubbles and Inflation 15
4.2 Challenges to the Domestic Enterprises 16
4.3 Trade Conflicts Caused by the Irrational Export Structure 17
5 Suggestions on Utilization of Foreign Capital 19
5.1 China Should Keep Utilizing Foreign Capital 19
5.2 Improve the Management of Foreign Capital 19
5.3 Control the Hot Money 21
6 Conclusion 23
References 24
Acknowledgements 25
