Cooperative business is also called contractual cooperation businesses. They are formed in China with joint capitals or terms of cooperation by foreign companies, enterprises, other economic organizations and inspaniduals with Chinese companies, enterprises, other economic organizations and inspaniduals. The rights and obligations of different parties are embedded in the contract. To establish a cooperative business, the foreign party, generally speaking, supplies all or most of the capital while Chinese party supplies land, factory buildings, and useful facilities, and also some supply a certain amount of capital, too.

　　3. Exclusively foreign-owned enterprises

　　Exclusively foreign-owned enterprises, which are totally invested by foreign party in China by foreign companies, enterprises, other economic organizations and inspaniduals in accordance with laws of China. According to the law of foreign-funded enterprises, the establishment of foreign enterprises should benefit the development of our national economy and agree with at least one of the following criteria: the enterprises must adopt international advanced technology and facility; all or most of the products must be export-oriented. The foreign funded enterprises often take the form of limited liability.

　　4. Joint exploitation

　　Joint exploitation is the abbreviation of maritime and overland oil joint exploitation. It is a widely adopted measure of economic cooperation in the international natural resources field. The striking features are high risk, high investment and high reward. The joint development is often spanided into three steps: exploitation, development and production. Compared with the other three means mentioned above, joint cooperation accounts for a small ratio.

　　5. Foreign-funded share-holding companies

　　Foreign companies, enterprises, other economic organizations and inspaniduals can form foreign funded share-holding companies in China with Chinese companies, enterprises, and other economic organizations. The total capital of the share-holding company is formed by equal shares，shareholders will take due responsibilities for the company according to shares purchased; Company will take responsibilities for all its debts through all its assets and the Chinese and foreign shareholders will hold the shares of the company. Among them, the shares purchased and held by foreign investors account for more than 25% of the total registered capital of the company. Limited company can be founded either by means of starting-up or raising, and the limited liability company invested by the foreigners can also apply to turn into share-holding companies. The qualified enterprises can also apply to issue A & B share and list abroad.

　　6. New types of foreign investment

　　While expanding areas and opening-up domestic market, China is also exploring and expanding actively its new types of utilizing foreign investment such as BOT, investment company and so on. Since multinational merger and acquisition has become the major type of international direct investment, Chinese government is now researching and enacting related policies so as to facilitate the foreigners to invest in China by means of merger and acquisition.

　　II. China’s policy direction of absorption of foreign investment

　　We should hold up high the flag of Deng Xiaoping Theory, follow the requirement of three rePsentatives, center on the principles and policies of our nation’s economic and social development determined at the 16th National Congress of the Communist Party of China, adapt to the new situation of world economic development, stick to the principles of active and reasonable utilization of foreign capital, combine foreign capital absorption with economic structure adjustment and industrial upgrading promotion, the improvement of socialist market economy system, the reinforcement of enterprise competitiveness, the expansion of export and development of open economy, the vigorous exploitation of China’s western area, and promotion of regional economies´ harmonious development. Measures should be taken to further improve the soft environment for foreign investment, explore actively new methods for absorbing foreign capital, put emphasis on absorbing advanced technologies, modern management and special talents, and actively absorb foreign capital to invest in industries of new and advanced technologies, encourage multinational to set up district headquarters, research and procurement centers; speed up the development of supporting industries and push on the service trade field to open up to foreign countries step by step.

　　1. Energetically improve the political and legal environment for foreign investment, and to enhance legal administration level. According to our commissions for joining WTO and the requirement for our opening-up process, we will further improve the legal system of absorbing foreign investment, keep on the steadiness, consistency, Pdictability and feasibility of the policies and laws of foreign investment laws, try to create a united, steady, transparent and Pdictable environment for foreign investment. We will further simplify the examination and approval procedures for foreign investment and adopt a standardized examination and approval system; reinforce our sense of legality, try to be open, just and transparent, and establish an incorruptible, industrious, pragmatic and effective government, creating a good administrative environment for foreign investment.

　　2. Maintain and improve an open and fair market environment. We should combine this with the current work of rectifying and standardizing the order of market economy, prohibit firmly the improper collecting fees from foreign companies as well as improper inspection and fine of them. Measures should be taken to destroy local protectionism and industrial monopoly. We should also enhance the lawful measures to protect the intellectual property right and take strong actions against illegal piracy, therefore, establish an open, unified and fair market environment, further perfect the complaining mechanism of foreign-funded and protect the legal rights of foreign merchants according to law.

　　3. Further open the field of service industry. In accordance with China’s self-development and Commitment to the WTO, we will open this field vigorously and steadily and systematically, perfect rules and regulations for service industry and formulate a united and standard system for accession into the market of foreign investment service. We will encourage the import of modern service concepts and advanced management experiences, technologies and modes of modern market operation, improve structure of service industry in China.

　　4. Encourage foreign businessmen to invest in the new high-tech industry, the basic industry, and supporting industry. The ability of technology innovation and sustainable development directly reflect the competitiveness advantages of a country. We will continue to encourage foreign investors to introduce, develop and innovate technology and to invest in technology-intensive project, and projects with advanced technology and to guide in enterprise registered capital proportion limitation and funding condition. The relevant stipulations of setting pioneering investment enterprise should also be consummated in order to facilitate the conditions of setting and developing high-tech corporations. We should attract foreigners to invest in supporting industry and encourage the localization of new materials, push domestic small and medium-sized enterprises to enforce cooperation with foreign companies and introduce the advanced and applicable technology to match the large foreign-funded enterprises, thus to enter the production and sales network of multinational companies.

　　5. Attract actively more multinational companies to invest in China. Multinational companies as leading force of today´s world economy. We will pay more attention to improve the relevant policies to attract multinationals to invest in China, establish the local headquarters and set up cross-country procurement centers. Using the experience and methods of merger and acquisition of other countries and taking the economical system with China’s characteristics and realities of into consideration, we should speed up the step to draft and improve the practical policy and stipulations of investment through merger and acquisition, further revise the relevant stipulations of the foreign-invested share-holding companies, push the formulation and perfecting of BOT and special permission transfer investment methods, the various stipulations for foreign-funded enterprise’s listing domestically and abroad.

　　6. Further promote foreign invest in the central and western regions. Vast areas in these regions are rich in resources for farming and stock raising, mineral resources and tourist resources. With a large population and a market of great potential labor forces, other key elements for production are relatively inexpensive with the steady progress and western development strategy, such facilities as transportation, communication and construction has imPssively improved. Because of the improvement of investment environment and ecological development and emergence of potential for the development of specialty economy, foreign businessmen who invest in these regions are facing brand-new opportunities and great development space.

　　FDI to China should Remain Stable

　　By Jiang Wei

　　2006-07-19

　　China's foreign direct investment (FDI) should remain stable in the second half of the year, but correcting the trade imbalance will be difficult in the short term, according to the National Bureau of Statistics.

　　"FDI to China will remain at the same level as last year," said bureau spokesman Zheng Jingping.

　　He said the government would continue to encourage the flow of investment in and out of China, adding that the country needed time to digest the large amount of FDI after years of big increases.

　　FDI flowing into China totaled US$28.4 billion in the first half of the year, a decline of 0.47 per cent from a year ago.

　　But according to Zheng, "foreign investment in China is still strong."

　　He attributed the drop to the strengthening of regulations and laws on environmental protection, the social security system and approvals of land transfer, which increased costs to some foreign investors.

　　"(The decline) also resulted from abundant domestic investment and other countries' policies to attract foreign investment," he said.

　　Contracted FDI, which indicates the future trend of foreign investment, in the first half hit US$88.5 billion, up 2.7 per cent year-on-year.

　　Zheng added that it is difficult for China to maintain a high growth rate on the large base. China has attracted US$50 billion to US$60 billion in FDI each year over the past few years.

　　In another development, Zheng Pdicted China would face difficulties in correcting the trade imbalance in the short term while processing trade accounts for half of the total trade volume.

　　China's imports and exports totaled US$795.7 billion in the first half. Exports rose 25.2 per cent year-on-year to US$428.6 billion in this period, while imports rose 21.3 per cent to US$367.1 billion.

　　The trade surplus for the first six months totaled US$61.45 billion, up 54.9 per cent year-on-year.