Reflections on China's open policy towards foreign direct investment

Abstract

China's open policy of kaifang zhengce assumes that foreign direct investment is an essential mechanism by which technological and other forms of know-how regarding best practices can be transferred into the Chinese economy. Yet, this transfer cannot be assumed to the extent that the know-how desired by China simultaneously defines the competitive advantage of multinational corporations. Kaifang zhengce is China's geopolitical strategy to resolve this paradox. Its key features involve combining an explicit spatial strategy within China and reliance on investment by overseas Chinese, especially firms based in Hong Kong. Yet, these firms are not foreign, as conventionally considered, and their contribution to the modernization of China is greater than supposed. ©1998 Regional Studies Association.