Foreign Direct Investment in China

By Phillip Donald Grub; Jian Hai Lin | Go to book overview
There are several large TICs active in both commercial and investment banking business. The most well-known TIC is the China International Trust and Investment Corporation (CITIC), which was established in 1979 under the direct leadership of the State Council. Its main functions are to:
Organize equity and contractual joint ventures, compensation trade, and other forms of business with foreign companies;
Invest both in China and abroad;
Develop technical cooperation with foreign companies;
Operate foreign exchange banking and international financing activities;
Deal with international and domestic leasing;
Engage in the real estate business;
Provide insurance for foreign investment in China; and,
Provide consulting services to both international and domestic clients.

Recently, the CITIC established a separate bank specializing in commercial banking activities providing services similar to those of the Bank of China. Thus, it has became an important source of financing for joint venture operations.


SUMMARY

China, like most countries, has a variety of financial institutions that play a significant role in foreign investment activities and operations. While understanding the organizational structure and each organization's function may be difficult, this understanding is essential for foreign investors who desire to operate businesses successfully in China. It is particularly true for those foreign investment projects that must deal with various Chinese governmental agencies on an almost daily basis.

While this chapter may serve as a basis for a general understanding of China's governmental organizations that are involved in foreign investment, a more thorough understanding can only be achieved through the experience gained by the foreign investor's operations in that marketplace. Furthermore, the role of financial institutions in China is changing as the leadership gains experience in moving toward a more market oriented economy. However, by understanding how these organizations work, foreign investors can avoid unnecessary delays and costs in their Chinese operations from the initial stages of project approval through the later stages of operation and expansion.

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