... the economy away from a centrally planned system to one that was more market driven, while still maintaining the rigid political framework of Communist party control. Starting from a tiny base, foreign investment surged to an annual average rate of $2.7 billion between 1985 and 1990 and then exploded to reach a record of $45.2 billion in 1997, making China the second biggest recipient of foreign direct investment inflows in the world after the United States.1 As a result of this inflow, 145,000 foreign-funded enterprises were established in the past 20 years, which realized capital investments of approximately $216 billion. According to some estimates, this investment might have provided 20 to 30 percent of China's economics growth during the late 1980s and 1990s. By 1996, firms with foreign ownership accounted for 12 percent of industrial production, with manufacturing concentrated in toys, shoes, electrical appliances, and other labor-intensive sectors.2 During the years ...

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