A Look at China's Foreign Investment Attraction Success

China is the country to keep your eye on. Here is the latest on foreign direct investment in the country. China’s scorecard for attracting foreign investment reads like this: Trying hard, doing well, but could do even better.

That is the assessment of a just-published OECD report, Investment Policy Review of China -- Progress and Reform Challenges. In 2002, China became the world’s largest recipient of total foreign direct investment (FDI), attracting nearly $53 billion. That performance comes thanks to China’s progress on structural reforms, its accession to the World Trade Organization, and efforts to bring regulations in line with international standards.

But there’s more to the story. At $30 per capita, China receives less FDI than other major developing countries, such as Brazil with $195 per capita. Moreover, in the 25 years since China opened the door to foreign investment, much of the spending has been concentrated in low-technology, labour-intensive manufacturing projects. A relatively low share of FDI has come from the world’s most prolific investors, historically OECD member countries.

China’s challenge now is to develop a more transparent business environment with a clear legal and regulatory framework. That should help attract higher-quality investments that are focused on long-term, high-technology, capital-intensive projects.