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le in the four SEZs in the south coastal region in the late 1970s and early 1980s. This situation has been changed since the 1990s when the special provisions were made widely available in a growing number of coastal cities, economic development areas and high technology development zones. China also open up sectors such as real estate, trading and retailing which has been previously prohibited for foreign investors. Liberalization of FDI in the property market contributed much for the rapid growth of FDI in the early 1990s.

Fourthly, an increase in FDI inflow is partly due to the phenomenon of recycled capital of Chinese origin. In order to take advantage of the special tax and other incentives provided to foreign invested enterprises, many Chinese firms cannot afford not to move out and invest back into China which is considered 'foreign investment'. Therefore, there was a flood of Chinese firms moving money off-shore and then recycled it back into China. The World Bank estimated that these might

Table 2.1 demonstrates a somewhat different pattern in the growth development of contractual and actual FDI amount in the early 1990s. The contractual FDI increased sharply in early 1990s. In 1993, both the number of projects and the total contractual amount reached their highest level. However, the actual amount of FDI has grown more slowly and did not begin to decrease until 1999.

From 1990 to 2002, the FDI realization rate of China has increased steadily till 1999, with the exception of the early 1990s. As mentioned above, there was an obvious gap between contractual and actual FDI inflow during this period. The political turbulence in 1989 contributed to the decline in the percentage of FDI realization. In addition, there was a fund shortage problem due to government's tight credit squeeze to control the overheated economy. Moreover, many announced projects might not be realized. Phony joint ventures were set up to take advantage of favorable tax incentives. Therefore, in the 1990s while contractual FDI surged to a record high, actual FDI utilization had only increased slowly. The realization rate of FDI fell to its lowest level of less than 20% in 1992 but started to increase steadily since then.

3. Conclusion 结论

This paper has introduced and explained the pattern of FDI in China. Moreover, Neo-Classical theory, industrial organization theory and internalization theory will be introduced to explain the essence and philosophy of FDI. Before 1999, the actual amount of FDI has experienced the sound development. However, the realization rate of FDI is lower, particularly during the period between 1990 and 1996. The challenges of financial crisis and business environment facing China will be considered as the significant determinations of FDI.
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