Several Major Controversies over Utilization of Foreign Investment

Since the reform and opening-up in 1979, attracting foreign investment has become an important part in China's opening up policy. Foreign direct investment has made great contributions for the sustained and rapid economic development in China. Utilization of foreign direct investment has gone through 28 years in China from 1979 to 2006. Till 2006, China has successively ranked first for 14 years in developing countries on the utilization of foreign investment and it has also become one of the world's largest FDI inflow countries. Till the end of 2006, 594,445 foreign-invested enterprises have been approved to establish, 703.974 billion US dollars actual amount of foreign capital has been utilized, about 300,000 registered foreign-invested enterprises are in operation, nearly 300 billion US dollars foreign capital stock is absorbed and the direct employment is about 26 million. 

In the process of utilizing foreign investment, a number of controversies were focused on the necessity of utilizing foreign capital, foreign investment utilization and the protection of national industry, reasonable scale of foreign investment, foreign investment monopoly, preferential treatment, mergers and acquisitions, foreign investment and national security, foreign investment and technological innovation, foreign investment and national brand , foreign and state-owned enterprises, foreign investment and domestic issues such as equal treatment. These debates and discussions have a wide range of effects which not only deepen people's awareness on using foreign capital, but also promote the formulation and revision of relative policies and regulations. 

So far, generally speaking, it can be seen four times of large scale controversies on the process of utilizing foreign capital. The first controversy occurred in the early 1980s, which was mainly centered on whether China should take advantage of foreign capital and whether market exchange for technology issues was essential. The second debate occurred in the late 1980s, which was mainly centered on what foreign investment brought to China and whether China was taken advantage by foreign investment. The third round of controversy occurred in 1995, which was mainly focused on whether foreign investment had threatened national economy security, whether it monopolized Chinese market, and whether it crashed national economy and national-brand products. From 2004-2006, the utilization of foreign capital had again triggered the fourth controversy, points included whether the current scale utilization of foreign investment was too large, whether foreign capital would lead to economic crisis, whether China would face the danger of becoming "Latin American", whether preferential policies for the foreign capital should be adjusted, what the result of market for technology policy was, whether foreign-funded enterprises' acquisition of the domestic enterprises would endanger national security, etc.