ABSTRACT
China has operated under a planned economy since the 1950s. China’s economy has grown at an average rate of nine percent per year since the 1979 economic reforms, with growth rates of more than 10 percent from 1992–1995. China must solve the state-owned enterprise problem in order to maintain economic stability and pave the way to full membership in the world trade organization and the global economy. Before 1979, government planners adhered to the principle that too much involvement in foreign trade could harm China’s centrally planned economy through external fluctuations and dependence on foreign markets. China absorbs foreign capital in two forms: foreign loans and foreign direct investment. In general, China’s trade, investment, and regulatory system are characterized by a lack of transparency and inconsistent enforcement. Foreign investors in a wholly foreign-owned investment enterprise establish the enterprise in China with their own capital and in accordance with relevant Chinese laws.
