Investment for development

OECD Investment Policy Reviews - China 2008: Encouraging Responsible Business Conduct


5 December 2008

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The 2008 Review provides a unique account of the motivations for and development of China's outward direct investment in recent years in light of government policy encouraging companies to "go global", focusing in particular on Chinese investment in Africa. It provides the first detailed and comprehensive analysis of the government's efforts to encourage responsible business conduct by enterprises in China and by Chinese enterprises operating abroad, highlighting in particular efforts to strengthen environmental protection and respect for core labour standards by enterprises. The Review concludes with an evaluation of enterprises' environmental conduct in China.

China investment expert, Ken Davies, talks about recent developments in China's inward and outward investment policy

Starting from virtually no outward direct investment (OFDI) in 1979, China’s OFDI was around US$450 million per annum in the 1980s, when most Chinese firms did not have sufficient knowledge and compe-titiveness to carry out outward investment projects. In addition, overall capital outflow was restricted by the government, given the severe scarcity of foreign exchange. China’s OFDI stagnated around an aver-age flow of US$2.3 billion per annum during the 1990s. In 2001, China’s OFDI flows posted a big jump to US$6.9 billion − more than six times the figure recorded in the previous year. This coincides with China’s accession to the WTO, after which China made great progress in liberalising its trade, investment and financial regimes and official an-nouncement of China’s “go global” policy within its 10th five-year plan (2001-2005).


This time the momentum seems to be sustained into a robust upward trend with steep acceleration in 2005-06 after the government substan-tially relaxed OFDI regulations in 2004. The average annual growth rate of China’s OFDI registered 116% for the period from 2000 to 2006, which is among the fastest in the world and is particularly impressive compared with the average growth rate of only 6% for total OFDI flows from the whole world for the same period. The latest figure showed US$17.6 billion of OFDI flow for 2006, accounting for 1.5% of total world OFDI flows. This makes China’s OFDI flow the 18th largest in the world and 4th among developing and transitional countries.





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