ABSTRACT

The confusion has three main roots. First, the struggle of the local governments against China's central government which is a central theme in China's history. Regional self-interest to attract as much foreign investment as possible results in a cut-throat competition between local governments and a political struggle against Beijing. Second, local and the central governments have different priorities. Local governments push for rapid economic development while the central government aims to control inflation and to guide foreign investment towards the sectors in the Chinese economy it considers have the highest priority. Beijing wants to avoid costly duplication of investments which would reduce overall profitability and safeguard against sub-standard technology imports. Third, local governments are not always aware of the applicable approval procedures.