China is now implementing a socialist market economy and the government is carrying out marketization management on the economy and the market decides resource supply, commodity and service offer and price. Enterprises make their own management decisions, thus the framework of market economy system start to be initially established and which provides an appropriate production and management environment for foreign investment.
Firstly, China's political situation was stable and the people lived and worked in peace and contentment, which created necessary social conditions for attracting foreign investment. Secondly, the initially established market economy system and the gradually perfected laws and rules created favorable legal environment for foreign investment.
Thirdly, with the raising of educational level and amplification of opening up degree, the people's diathesis improved, their greatly changed ideological ideas and dwindled discrepancies of languages, cultures and customs, have offered proper social environment for foreign investment. Fourthly, the amount of labor force with improved diathesis was sufficient. The cost advantage caused by abundant cheap labor forces provided tremendous opportunities for foreign investors to invest on the labor-intensive industry, actually, over half of the foreign investment gathered in the labor-intensive industries. On the other hand, China also possessed related number of skilled labor forces that have accepted favorable training and education, and can meet the requirements of foreign investment on high-tech industries . In the fields of enterprise management, law service and accounting, etc, there was deficiency for the special sophisticated talents; however, this status is changing.
Fifthly, related foreign investment policies have also adapted to the requirements of market economy and international rules. Industrial policy has become an important way for China to control foreign investment. According to the development strategy of national economy and industrial development, China established comprehensive industrial policies for foreign investment to lead them to invest in target industry. The Chinese government in April 2002 issued the newly amended "Catalogue for the Guidance of Foreign Investment Industries," encouraged more foreign investment to flow into target industries, for example, agriculture, resource development, infrastructure construction, export and high-tech industry, however, the government has specifically prescribed industries those are not allowed to erect exclusive foreign-funded enterprises and the strategic industries and investment fields that the Chinese part must hold a controlling share. According to the commitments to WTO entry, the opening degree of the industries will be increased by a large margin. For example, telecom service industry is to shifted from the prohibited category into limitation category, and the geographical area and business scope of finance, insurance, commerce and foreign trade and so on will be further enlarged. The strategy of Western Development has already been carried out in order to develop regional economy harmoniously, and the government has enacted the "Advantageous Industries Catalogue for Foreign Investment in Middle and Eastern Regions" to practice preferential policies for foreign investment in these advantageous industries .
As for foreign trade management, China has greatly reduced the customs, gradually called off the plan, quota and warrant management, ensuring the transparency of establishment and implementation of related policies. In addition, foreign exchange control will also be loosened step by step.
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