ABSTRACT
This chapter explains the key concepts of foreign direct investment (FDI). China has been continuously recognized as a top destination for FDI. After China started its economic reform in the late 1970s, FDI began to flow into the country. Recognizing FDI as an important vehicle to access new technology, capital as well as export market, the Chinese government introduced a range of policies and procedures characterized by setting up Special Economic Zones (SEZs) for foreign investors and allowing the formation of joint ventures. FDI inflow began to surge after China reaffirmed its commitment to economic reforms and open policies in early 1990s. FDI flows into China, especially those from developed countries, increased steadily. The entity that makes FDI is called direct investor. Its overseas enterprise is called direct investment enterprise. Investments that are classified as FDI include equity capital, the reinvestment of earnings, and the provision of intra-company loans.
