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FDI to China’s coastal regions.180 Also in the booming coastal cities, there are large numbers of educated and bilingual or multilingual local Chinese to staff the professional and managerial layers of manufacturing concerns, and they are willing to work for moderate salaries.

Low Price of Land

Many domestic manufacturing concerns in China never had to buy the land for their factories. Land was simply allocated to state-owned or collective-owned enterprises during the Maoist command economy period before 1978. During the economic reform period, many such factories still inhabit the free land. If they form a joint venture or are bought out by a foreign company, the assigned or negotiated value of that land is part of what they bring to the deal, but first the land must be converted from “allocated” to “granted” for a large fee. Today, the value of land in urban or rural China is only partly market driven; much of whatever price emerges is still arbitrary and command economy driven: “There is still little transparency in transfers of land-use rights in China, with most transactions set in bilateral agreements between buyers and sellers.”181 Current land values in different urban areas of China vary enormously. Property prices have risen dramatically in Shanghai, sparking fears of a “bubble” and the possible future collapse of real estate and land prices.182 The cities with the most expensive land in the PRC today are, in order from the most expensive: Beijing, Shanghai, Hangzhou (capital of Zhejiang Province), Nanjing (capital of Jiangsu Province), Chengdu, Tianjin, Guangzhou (capital of Guangdong Province), Chongqing, and Shenzhen which is in the Pearl River Delta of Guangdong. Land prices in the Yangtze River Delta have now surpassed those in the Pearl River Delta.183 However, one economist reported that in China: “Land prices have declined by about 70% in major urban areas since 1993.” 184

Incentive policies to promote foreign investment in China

During the 1980s and 1990s, China gave special financial incentives, land use benefits, foreign currency exchange preferences, tax holidays, and other tax incentives to foreign companies willing to invest and set up factories in its coastal regions, primarily 4 (now 5) special economic zones (SEZs) and 14 opened cities located in Guangdong, Shanghai, Jiangsu, Fujian, and other coastal provinces; therefore foreign direct investment (FDI) poured into China in general and into these Chinese coastal areas in particular.185 In addition, China’s regulatory climate has improved in some ways that promote entrepreneurship, new businesses, and flexibility of hiring workers. The cost of starting a business in China is higher and the time required to do so is longer than in developed countries, but these measures are more favorable in China than the East Asia/Pacific average; and in order to promote the hiring of more workers, China has slashed regulatory burdens associated with hiring.186 Chinese policies in the 1990s and today encourage foreign direct investment, particularly in manufacturing, with the result that a little over half of FDI has been in the manufacturing sector:

Not only does China place few restrictions on foreign ownership of manufacturing firms, through its tariff and other policies it allows foreign firms


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