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China strongly emphasizes attracting foreign investment in projects that will enhance the nation's economic development. Beginning in the early 1970s, China contracted for the construction of a substantial number of complete plants, notably for iron and steel, automobile, and fertilizer manufacture and power generation, including nuclear power. Such agreements, often made with private firms from Japan, Germany, Italy, France, the United Kingdom, and Canada, as well as with agencies of the Communist states, all called for direct purchase of materials and services. Residual ownership by foreigners and remittance of profits from production were expressly disallowed.

China's policies toward private investment have become increasingly open. In the 1980s, foreign investment was restricted to export-oriented businesses, and foreign investors were required to enter into joint ventures (JVs) with Chinese counterparts in order to enter the market. Under the Joint Ventures Law, enacted in 1979 and revised in 1982, the development of joint ventures for the production of exports has been particularly stressed as a means of securing for China the foreign exchange needed to pay for purchases of advanced technology. Foreign investment in products for the domestic market, other than those needed for modernization, was discouraged.

In the early 1990s, the government began allowing foreign investors to manufacture and sell an increasingly wide variety of goods in the domestic market. From the mid-1990s, wholly foreign-owned enterprises (WFOEs) have been allowed to operate. In 2000 and 2001, China revised its laws on JVs and WFOEs to eliminate requirements for foreign exchange balancing, to eliminate domestic sales ratio requirements, to eliminate or adjust advanced technology and export performance requirements, and to modify provisions on domestic procurement of raw materials. With China's accession to the WTO in November 2001, foreign investment opportunities were further expanded with the removal of financial and distribution services from the restricted list. Only the production of arms, and the mining and processing of certain minerals are currently off-limits to foreign investment.