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Q: When China began to attract foreign investment, some people maintained that the absorption of foreign capital in certain industries would attack "national industry." What is China's viewpoint about it? Does such situation appear?

A: Debate on whether the absorption of foreign capital will attack "national industry" and "national economy" began immediately after China implemented the open policy and has never stopped. But experiences of other countries have proved that a country could not develop its national economy if it does not open up to the outside world.

China is a developing country. National industry is the basis for our subsistence and development. It is true the opening-up and absorption of foreign investment will bring certain attacks to our national industry, but up to date no countries or regions in the world come to their end owing to their opening-up to the outside world. On the contrary, most of them have benefited from their opening-up. Also China has achieved more benefits than it has suffered in its absorption of foreign capitals in the two-decade opening-up.

Statistics show that during 1980-2004, China absorbed a total of US$560 billion foreign direct investment, which brought out 40 percent of China's GDP. Large amounts of foreign capital invested in China has relaxed the shortage of capital in China's economic development and guaranteed the construction of a large group of projects for quite a long period of time since China implemented reforms and the open policy. Also the absorption of foreign capital and establishment of foreign-invested enterprises have sped up renewal and upgrade of some pillar industries of Chinese national economy, such as auto industry, television and electrical appliance industry, computer industry and other high-tech products, greatly shortening the time to catch up with developed countries. At the same time, they have offered opportunities for us to learn modern management and thus sped up China's integration into the international economy and helped China prepare to enter the WTO.

Of course, we must admit that the huge amount of foreign capital flooding into China has to some extent affected certain national industries. At present, more than 200 of the top 500 transnational companies have already invested in China, bringing with them high technology and huge projects. On the whole, the aggregate sales of foreign-invested companies account for not a great proportion in the Chinese market. But in certain areas such as chemicals, beverages, tires and some mechanical or electrical products, foreign companies have a much bigger market share and have posed some challenges for competing Chinese companies.

A survey by a government department shows that, at present, products of foreign-invested companies account for not much in the Chinese market and do not impact the safety of China's national economy. More positive utilization of foreign capital and upgrading of the international competitiveness of Chinese enterprises are a must for future economic reform and development.