Q: At present, enterprises from many countries have expected good investment returns in China, and the country has been among the world's best in attracting foreign investment. Why are these foreign enterprises so willing to invest in China? What has China done in terms of improving the investment environment?

A: Recently, as the world economy remains in the doldrums and there exists a substantial decrease in transnational investment, China has indeed become one of the most attractive countries for foreign direct investment (FDI), leading the developing countries and regions in the actual use of foreign capital in the past decade. In 2002, China absorbed the most FDI in the world, outpacing the United States for the first time. Statistics show that since the implementation of reforms and the open policy China has absorbed a total of US$560 billion of foreign capital and attracted more than 250,000 foreign enterprises to invest in China.

The prime reason for China becoming the priority for foreign investors is that the country provides them with a sound environment for investment, production and operation.

Firstly, since China implemented of reforms and the open policy in 1978, its national economy has maintained a high development speed with an average annual growth rate of 9 percent, coming out on top of the world. Meanwhile, as China's economy is becoming more open to the outside world, its production costs including labor, raw materials and services remain very competitive in the international market. The sound macro-economic environment has displayed a tremendous potential for growth and provided favorable conditions for foreign investment.

Secondly, China is a vast country with abundant agricultural and natural resources, an advantage for China to attract resource-seeking foreign investment and a firm support to foreign investment in the manufacturing and service industries. Besides, China has greatly improved its infrastructure facilities, such as transport, telecommunications and water and power supplies and increased supply ability and capacity of energy, raw materials and spare parts.

Thirdly, China has established a preliminary market economy framework. Laws and regulations have been updated; the labor force is abundant with ever-improving quality. The policies that encourage foreign investment have gradually measured up to international standards, providing an easy social and legal environment for foreign investment.

Fourthly, in the past few years, China has stipulated comprehensive policies concerning foreign-invested industries and encouraged foreign investors to put more investment in agriculture, resource exploration, infrastructure construction, export-oriented and high and new-tech industries. Foreign investment in those fields will enjoy preferential treatments.

In 2001, in line with market economy requirements and its commitment to the WTO, China straightened out and revised relevant laws and regulations as well as policies and documents, simplified the examination and approval procedures for the establishment of foreign enterprises, further opened the finance, insurance, telecommunications, and distribution sectors, and lifted restrictions on shareholding rights by foreign-invested companies in commerce, foreign trade, auto, chemical, infrastructure construction and mineral resource exploration. All these measures laid a better foundation for absorbing foreign capital.

Additionally, China is a huge market with a population of over 1.3 billion, which will continue to expand in the coming decade. Estimate shows, in China's coastal and central areas, a total of 100 million families will have an annual income of 150,000 yuan (US$18,000) by 2010, meaning these families will be capable of purchasing private homes and cars. This huge market demand will provide more potential opportunities for foreign investment in China.

A new IKEA store opens in Shanghai. Favorable investment environment in China attracts a good deal of foreign capital.