Chapter 1: the new stage of China’s use of foreign capital
Before 1989, China takes advantages of her preferential policies to attract foreign
capitals but for many reasons, the scale of foreign capitals is quite small, After 1992,
Deng Xiaoping's south cruise, the foreign capital began to flow into China in large-scale. The reason is that the profits of enterprises decreased, the market shank and
the commodity price went down, which resulted form the slack of Chinese economy form
1989 to 1992. In order to get out of the deep end, the all the enterprise, the enterprises
expected to refresh the techniqu es and offer more new products to quickly capture the market, and survived and developed
through the difference of system and price, particularly the preferential treatment.
Therefore，foreign capitals were strongly needed（also resulted form the difference of internal and external policies）, while the expanding
of influx of foreign capitals into China happened. This stage didn’t end until 1997. In this stage, the joint venture started competing intensively (primarily
for technique, market shares and non- price factors) in Chinese market, and led to the maturity of Chinese market comp etition.
The utilization of the foreign capital has already entered a new stage regarding financial
crisis in Asia, which is symbolized by the followings
1. The percentage of foreign capital over the whole investment decreases, and has come
into a low percent period. Meanwhile, the need of foreign capital is saturated. After 1992,
despite that The utilization of the foreign capital has already entered a new stage, the
peak is 1994 when the percentage of foreign capital over total investment was about 22.
75%, henceforth the percent gradually descended. This showed that the need of foreign
capital in Chinese market had been relatively saturated or balanced. In 1997 and 1998，the amount of FDI was basically about 45 billion USD, which proved that the capacity of Chinese market of foreign capital
was limited and the market really did not need too much foreign capital. (Local policies
and subjective wishes are other aspects). We can also find that the decreasing of foreign
capital from the intensive decreasing of the proportion of foreign capital over the total
social investment. The proportion of foreign capital was 20.66% in 1995, but in 1996 the
proportion suddenly decreased to 14.65% without any adjusting of governmental
policies, which was obviously resulted form the changing of Chinese market. The figure was 14.79% in 1997 and 13.11% in 1998, which
indicated that the scale of foreign capital and total social investment had been fixed on
and the market lacked the either investing momentum or need for foreign capital.
However, the competition of price between enterprises beginning form 1997 suggested
the changing of market necessarily resulted to the decreasing of domestic and foreign
investments from another angle because the market had entered the period of declining
or stabilization. The amount of the utilization of foreign ca pital in 1999 was 40.4 billion USD, decreasing 11.4% over the previous year but the total
investment in China was 2.9876 trillion RMB, increasing 5.2% over the previous year. The
proportion of foreign capital was 11.2%, falling behind 13.48%, the proportion of 1992,
and only about half of the highest proportion in 1994. This proved that the need for
domestic capital exceeded that of foreign capital, and the new changing had emerged in
utilization of foreign capital (including the adjusting of some policies). While the proportion
of foreign capital was lower than that of 1992, the utilization of foreign capital has already entered the new stage of
stable or decreasing scale.