After the end of the ‘Cultural Revolution (1966-1976)’ in 1976 and the rise to power of a pragmatic elite led by Deng Xiaoping, the PRC began preparations for a launch of the reform and opening-up policy. The Chinese diaspora (overseas Chinese, huaqiao-huaren) totalled more than 19 million people at the end of the 1970s, of whom about 89.7% lived in Asia, about 7.8%, in America, 1.7% in Europe, and 0.4% each in Africa and Oceania (calculated from: 2001 Statistical Yearbook of the Overseas Chinese Affairs Commission). From the outset, the reformers viewed the Chinese diaspora with the size of capital it owned at USD66.7-80.0 billion (calculated from: Jia and Yu 1995) as one of the most important instruments of the above policy. To understand the diaspora’s aspirations regarding its historical homeland and to assess the prospects for its engagement in the country’s economic development, the PRC leadership held meetings with the leaders of overseas Chinese communities. To restore the trust of overseas Chinese, the authorities compensated their relatives and re-emigrants for losses incurred during the “cultural revolution” and reconsidered the criminal cases against them, which had been constructed based on false accusations.

For its part, the Chinese diaspora was excited by China’s reform and opening-up policy, considering it as a unique opportunity to develop business and build an economically strong homeland capable of effectively protecting the interests of the overseas Chinese in the foreseeable future.

In late December 1978, the Third Plenary Session of the 11^th Central Committee of the Chinese Communist Party convened in Beijing, initiating the reform and opening-up policy. On the final day of the plenary session, the Congress on Overseas Chinese Affairs took place. Liao Chengzhi, head of the Overseas Chinese Affairs Office of the State Council of the PRC, delivered a working paper entitled ‘The Policy of the Chinese Communist Party towards Overseas Chinese’ (Liao Chengzhi wenji (xiajuan) 1990). This document outlined a comprehensive plan for engaging with the Chinese diaspora in the following years, including incentives for business activities of overseas Chinese in the PRC. The Chinese diaspora was incorporated into the strategic plan for socialist modernisation of the People’s Republic of China, formulated at the plenary session (Larin 2008), and was granted priority rights to conduct business in the country with its enormous economic potential.

Having analysed the legislative initiatives of the PRC leadership concerning overseas Chinese investors and the concurrent key developments in the world and China, we identified three main periods of Chinese diaspora business establishment and development in the PRC: 1979-1991, 1992-2007, 2008 - early 2020s.

As of early 1979, there were three ways for the Chinese emigrants (huaqiao), the Chinese holding a foreign citizenship (huaren), and entrepreneurs from Hong Kong or Macao to do business in the People’s Republic of China:

These transactions were settled in PRC’s national currency, the Chinese yuan (renminbi). To protect the investment capital in foreign currency from depreciation, it was proposed to regulate the dividend rate annually, ensuring that it was slightly higher than the interest rate on deposits in foreign banks. All the relevant investors were subject to a progressive income tax (Liao Chengzhi wenji (xiajuan) 1990).

In 1979-1989, the PRC government opened special economic zones (SEZ) in the southern coastal regions, which are the native places of Chinese emigrants (qiaoxiang). The Shenzhen, Zhuhai and Xiamen SEZs were opened in 1980, and the Shantou, in 1981. In 1984, economic and technological development areas (ETDA) were additionally opened in 14 coastal cities; in 1985, SEZs were opened in the Yangtze and Pearl River deltas, as well as in the south of Fujian Province (Xiamen – Quanzhou – Zhangzhou). In 1987, Hainan Province received the SEZ status. By 1991, 300,000 square kilometres of PRC’s coastal areas were effectively open for foreign economic co-operation (Afonasyeva 2013). The income tax rate of 10-15% applied in SEZs and ETDAs was very attractive compared to the usual income tax rates for local private Chinese entrepreneurs or foreign entrepreneurs of non-Chinese origin (hereinafter, foreign proper businesspeople) in the PRC, which reached 35-40% at the time (Afonaseva 2022).

Outside the SEZs and ETDAs, the overseas Chinese enjoyed significant advantages over foreign proper investors or local Chinese businesspeople. They enjoyed all the privileges and preferences granted to foreigners by the 1979 “Law of the People’s Republic of China on Chinese-Foreign Equity Joint Ventures” (Zhonghua renmin gongheguo zhongwai hezi jingying qiye fa 1979; Zhonghua renmin gongheguo zhongwai hezi jingying qiye fa shishi tiaoli 1983) and its 1983 implementing regulations. But they were not effectively subject to the restrictions imposed by the same acts regarding the level of technology used, insurance against risks or the choice of economic sectors to operate in. They opened family enterprises of the ‘san lai yi bu (take three, compensate one)’ type, labour-intensive companies set up by overseas Chinese with their relatives or re-emigrants in the PRC and engaged in processing customer-supplied materials, assembling [customer-supplied] parts and compensation trade.

In 1985, the “State Council Provisional Regulations on Preferential Treatment for Investment by Chinese Emigrants” (hereinafter – “Provisional Regulations–1985”) (Guowuyuan guanyu huaqiao touzi youhui de zanxing guiding 1985) was issued, providing overseas Chinese throughout the country with business conditions comparable to SEZs or ETDAs.

This led to a gradual change in the forms of business activity of overseas Chinese in the PRC. In 1988, they started to move from ‘san lai yi bu’ businesses to setting up enterprises of any of the three capital types (co-operatives, joint ventures (hereinafter referred to as JVs), or enterprises wholly owned by overseas Chinese).

In August 1990, the provisional document was replaced by the “State Council Regulations on Encouraging Investment by Chinese Emigrants and Compatriots from Hong Kong and Macao 1990 (hereinafter – “Regulations-1990”). The new Regulations retained the huaqiao-huaren benefits, preferences, and tax rates available to foreigners. In addition, they were exempt from customs duties, the consolidated industrial-commercial tax, licensing of imports of goods, materials and raw materials for economic activity purposes, export duties, and in some cases from the consolidated industrial-commercial tax on export products. This secured the right of the huaqiao-huaren and Hong Kong or Macao compatriots to invest in any province, autonomous district, direct-administered city, SEZ and ETDA (Guowuyuan guanyu guli huaqiao he xianggang aomen tongbao touzi de guiding 1990). Some provinces, such as Guangdong, Zhejiang and Hainan, provided them with additional benefits and preferences.

Thus, the huaqiao-huaren capital, as well as Hong Kong and Macao capital, enjoyed significantly more benefits and preferences in the PRC than the capital of foreign proper investors. This situation shaped the structure of sources of stocks of foreign direct investment (hereinafter – FDI) in the PRC for many years to come. In 1979-1991, over 57% of the FDI stock (USD15.45 billion) came to the PRC from the overseas Chinese, mainly through Hong Kong, Macao and from five Southeast Asian countries (Singapore, Indonesia, Malaysia, Philippines, Thailand) (see Table 1).

In the early years of reform, the Chinese diaspora had a certain distrust of the PRC Communist government. Long aligned with the USSR and partly discredited by the freezing of overseas Chinese assets during the Cultural Revolution and the harassment of relatives of overseas Chinese, it was not until the 1970s that the PRC embarked on a path of normalising relations with the developed capitalist countries and their former colonies where overseas Chinese lived and did business. Hong Kong and Macao were then under the jurisdiction of Britain and Portugal, respectively. The locals there were, in fact, overseas Chinese themselves compared to mainland Chinese. In addition, overseas Chinese entrepreneurs from other regions were doing business in Hong Kong and Macao and saw these two regions as a convenient and safe base for further investing in the PRC. At that time, Indonesia, Malaysia, Singapore, Thailand, and the Philippines accounted for about 75% of the total capital of the global Chinese diaspora (USD50-60 billion) (Jia and Yu 1995). Some of this capital was invested in the PRC directly from these five Southeast Asian countries, and some via Hong Kong or Macao.

Figures 1 and 2 show the dominance of overseas Chinese over foreign proper investors in the PRC throughout the period 1979-1991. In the early years of reform, overseas Chinese invested relatively small amounts in the PRC, around USD160-350 million annually. It was in 1985 that the overseas Chinese investment approached USD1 billion. From that year on, the benefits and preferences of the “Provisional Regulations–1985” were extended to them. From 1986, their annual investment exceeded the above amount. The new measures to promote the business activities of the overseas Chinese set out in the “Regulations-1990” led to a significant increase in overseas Chinese investment in the PRC, and their share in total FDI increased substantially, reaching more than 62% between October 1990 and December 1991.

The growth of overseas Chinese investment in the PRC indicated a growing confidence and interest in PRC reforms among business circles in the Chinese diaspora. While they invested about 2% of their global capital in the PRC in 1979-1984, this rose to about 5% of their global capital in 1985-1991 (calculated from: Jia and Yu 1995).

Investment incentives for overseas Chinese and special tax treatment for foreign businesses under the “Provisional Regulations–1985” and “Regulations-1990” encouraged FDI in manufacturing, especially in labour-intensive export production. In particular, manufacturing accounted for 93.7% of the 7,273 foreign and overseas Chinese investment projects in 1990. The real estate and land sector also garnered attention of investors (Afonasyeva 2013). For comparison, in 1979-1987 the FDI sectoral structure was dominated by the hospitality industry, power industry, mining, light industry and electromechanical industry.

PRC law did not impose any territorial restrictions on the huaqiao-huaren investment. However, in the early years of the reform, they preferred to invest mainly in their hometowns in Guangdong and Fujian provinces (the cities of Shenzhen, Shantou, Zhuhai, and Shantou). As more ETDAs and SEZs were opened, overseas Chinese investors explored new areas: since 1984, the southern and eastern coastal areas of Jiangsu, Zhejiang, Liaoning, Shandong, and Hebei provinces, Guangxi Zhuang autonomous region, the cities of Shanghai and Tianjin; since 1985, Anhui province; since 1987, Hainan province; since 1991, Yunnan province.

The violent suppression of student protests in Beijing’s Tiananmen Square in 1989, the subsequent condemnation of the PRC leadership’s actions by the capitalist countries, the sanctions and other restrictive measures imposed on the PRC led to a temporary weakening of the country’s international image, caused internal party controversies, and slowed down reforms in 1989-1991. Deng Xiaoping’s inspection visit to the economically developed South China in early 1992 helped to resolve the problems and continue the course of reform. Overseas Chinese businesspeople in Guangzhou, Shenzhen, Zhuhai, and Shanghai supported the reform and opening-up policy, responding to Deng Xiaoping’s call for a pragmatic rather than ideological approach to assessing the results of reform. Advancing the reform required not only improving the investment climate and expanding the rights of international investors, including the huaqiao-huaren, but also strengthening control over their economic activities and gradually reorienting their business from labour-intensive to capital-intensive production.

A progressive VAT rate scale, a business tax and a consumption tax were introduced in 1994 to replace the consolidated industrial-commercial tax (CICT) for international and domestic businesses. The maximum aggregate rate of all new taxes was 2% lower than the CICT (67% vs. 69%).

From 1995, the procedure for obtaining export quotas and licences for Chinese-foreign co-operatives was simplified, and in certain instances, businesses were exempt from obtaining these quotas and licenses. Foreign investors were allowed to withdraw their capital early by transferring all the fixed assets of the co-operative to the Chinese side free of charge. For co-operatives with a legal entity status, the minimum share of foreign capital was set at 25%, as in the case of JVs. Investing encumbered property in a co-operative was prohibited.

In 1995, four categories of projects were defined regarding foreign investment (including overseas Chinese investment): those encouraged, permitted, restricted, or prohibited². The first category included projects in the field of new and high technologies that meet market demands and promote the development of China’s central and western regions; the third category included technologies that were not new but important to the PRC, pilot projects, monopoly production, exploration and extraction of rare and valuable mineral resources, projects requiring centralised planning; the fourth category included projects that posed a threat to national security, arable land, military facilities, those that polluted the environment, or those that aimed to exploit the PRC’s unique handicrafts or technologies. The second category included all other projects (Afonaseva 2022).

In 2000, the mandatory requirements for foreign companies to use state-of-the-art technology (equipment) or to export most of their finished products, to purchase raw materials, fuels and other materials in the PRC were removed.

In 2001, foreign partners in JVs were exempted from the income tax on the transferring abroad their residual assets after liquidation in excess of their share in the JV’s authorised capital, and a reduction in the rates of the new taxes (replacing the CICT) or their exemption was authorised for some export goods produced by JVs.

In 1995-2000, Beijing Municipality, Fujian Province, Liaoning Province, Sichuan Province, Heilongjiang Province, Hubei Province, Inner Mongolia Autonomous Region, and Guangxi Zhuang Autonomous Region provided additional investment incentives to the overseas Chinese, re-emigrants and their relatives, and in some cases to foreigners and compatriots from Hong Kong, Macao, or Taiwan.

In addition to the above legislation, the PRC introduced regular promotional presentation events for overseas Chinese businesses. For example, in 1993-1998, a series of symposiums on international technological and economic co-operation were held in Shenzhen, Zhengzhou and Changsha with the participation of the huaqiao-huaren. In 2000, the Overseas Chinese Affairs Office launched a series of thematic activities to engage overseas Chinese in the development of the PRC’s western regions. Since 2001, Wuhan has hosted an annual Conference on Overseas Chinese Pioneering and Developing in China. The Friendship Conference of Overseas Chinese Associations has been held since 2001. Seminars on science and technology co-operation for overseas Chinese businesses have been held since 2002, with the aim of engaging the Chinese diaspora in the modernisation of old industrial centres in the region (Qiu and Yan 2011).

New incentives and preferences for foreign, and especially overseas Chinese, entrepreneurs, as well as a series of events to showcase the new business environment, led to a significant increase in FDI by overseas Chinese and foreigners proper in the PRC between 1992 and 2007 (see Figure 3).

The overseas Chinese continued to be the main source of FDI in the PRC. In 1992, a turning point for the PRC, they invested USD7.98 billion, or 72.46% of the total FDI in China. In 1993, they increased their investment in the PRC economy 2.4-fold, reaching USD18.86 billion, or 68.56% of the total FDI. This indicates the high confidence of the Chinese diaspora in the PRC’s reform and opening-up policy (see Figures 3 and 4).

Overseas Chinese direct investment in the PRC followed a steady upward trend from 1992 to 2007. There were only two occasions during the period when their volume declined. In 1999, they fell by 15.6% to USD21.64 billion due to the Asian financial crisis. In 2003, they declined by 3.4% due to the SARS-CoV epidemic, which affected Hong Kong, the main region through which investment from the Chinese diaspora was channelled, and the economically developed southern province of Guangdong, one of the main regions receiving the investment. In total, the huaqiao-huaren invested USD412.5 billion in the PRC between 1992 and 2007, accounting for 53.9% of the FDI stock during this period (see Figures 3 and 4). From 1998 onwards, the overseas Chinese began to actively invest in the PRC via offshore zones (British Virgin Islands, Cayman Islands, Mauritius, Samoa, and others). However, Hong Kong remained the main source and transit hub for overseas Chinese investment in the PRC.

Figures 3 and 4 show an increase in the investment activity of non-Chinese foreign entrepreneurs in the PRC over the period 1992-2007. In 2003-2006, they invested more capital in the PRC than the overseas Chinese, although the latter’s investment also increased. This was due to the opportunity for non-Chinese foreigners to sell their products in the PRC domestic market. In fact, since the beginning of the reforms, the overseas Chinese have been able to sell some of their products in the PRC domestic market through their partners in co-operatives or joint ventures, who were usually their relatives or re-emigrants. Nevertheless, the huaqiao-huaren continued to focus on export production. Overall, the overseas Chinese and foreign proper investors made the PRC the world’s largest FDI destination by 2007.

In terms of the number of new enterprises established in China, the overseas Chinese significantly outperformed their foreign proper competitors. Between 2001 and 2007, the number of enterprises set up each year by the overseas Chinese almost doubled (from 12,700 to 23,600), while the same figure for the foreign proper investors increased by 19% (from 9,200 to 11,000). Figure 5 shows the growth dynamics of these companies.

In total, as of the end of 2007, there were 407,700 enterprises established by the overseas Chinese in the PRC, of which 144,920 were established in 2001-2007 (64.5% and 60.4%, respectively, of the total number of foreign-owned enterprises) (calculated from: Zhongguo shangwu tongji nianjian 2008).

In 2001, the overseas Chinese enterprises in the PRC began to shift from labour-intensive to capital-intensive production geared to foreign markets. The average direct investment per the huaqiao-huaren-owned enterprise in 2001-2007 was USD1.6 million, twice as much as in 1979-2000 (Zhongguo shangwu tongji nianjian 2008).

During the period under review, manufacturing still dominated the sectoral structure of the huaqiao-huaren business activity. In 2004, it accounted for more than 80% of the Chinese diaspora enterprises (Zhonguo qiaozi qiye fazhan niandu baogao 2008). Between 1990 and 2004, an average of 69.2% of the overseas Chinese enterprises were engaged in manufacturing. The main manufacturing clusters were located in the southern and eastern regions (provinces of Guangdong, Jiangsu, Fujian, Zhejiang, Shandong, Yunnan, cities of Beijing, Tianjin, Shanghai), central provinces (Anhui, Jiangxi, Henan, Hunan) and western regions (provinces of Shaanxi, Sichuan, Gansu, city of Chongqing). Industrial clusters in the Yangtze Delta became the main destination for overseas Chinese investment. The service sector accounted for at least 25% of the huaqiao-huaren-owned enterprises, including over 8% in real estate, over 3% in telecommunications, computer and IT services, and almost 3% in the hospitality industry (see Table 2). The sectoral structure of the business activity of the overseas Chinese in the PRC met the country’s needs for industrial development and export growth at this stage of reform.

The global financial crisis of 2008-2009, measures taken by the PRC government to mitigate its negative impact on the country’s economy and the improvements to the tax system significantly changed the business environment in the PRC. A 16% drop in Chinese exports in 2008-2009, rising commodity prices and the appreciation of the yuan made it unprofitable to further increase the output of export products (Afonasyeva 2013).

On 1^st January 2008, the PRC Enterprise Income Tax Law (2007) came into force. The income tax rate for resident enterprises was reduced from 33% to 25% of all PRC or overseas income. The same rate applied to non-resident enterprises that had organisations (facilities) in the PRC, provided that their overseas income was related to the activities of those organisations (facilities). Otherwise, non-resident enterprises were subject to a 20% tax on income earned in the PRC. The tax base could be reduced if the company engaged in charitable activities, which was particularly important for the overseas Chinese, who traditionally donated substantial amounts of money to their home country. The list of tax incentives was significantly expanded. In particular, lower tax rates were introduced for state-backed high-tech enterprises: 15% for high-profit enterprises and 20% for low-profit enterprises. For a number of projects (agricultural or infrastructure projects, technology transfer), it was now possible to reduce the tax rate or avoid paying taxes. Income from government bonds, dividends on equity and investment, and income from non-profit organisations were exempt from the income tax. The regional income tax rates could be reduced, or the corresponding regional taxes could be eliminated for companies operating in the autonomous regions (relatively backward and poor) (Afonaseva 2022).

This income tax law significantly improved the business environment for both domestic and foreign proper companies in the PRC. However, the huaqiao-huaren businesses were still in an advantageous position. They enjoyed the general benefits of the new law and special benefits under the “Regulations-1990”. The overseas Chinese, as well as their relatives and re-emigrants, also enjoyed certain types of benefits and preferences granted at the regional level.

In 2008, major changes were introduced in the areas of labour protection, wage increases and environmental protection, jeopardising the existence of labour-intensive, low-tech industries which were still the focus of a considerable number of overseas Chinese businesspeople. In addition, to minimise the loss of exports, the Chinese leadership embarked on an expansion of domestic demand. The People’s Bank of China (the country’s central bank) cut its key interest rate, which led to a noticeable increase in consumer credit by Autumn 2009. The introduction of social security and other measures to improve the welfare and financial stability of the population led to a growth of the middle class and its purchasing power. In 2009, domestic consumption grew by 15.5% compared with 2008, and by 48.8% compared with 2007 before the crisis, totalling 13.27 trillion yuan (USD1.75 trillion) (calculated from: China Statistical Yearbook 2009: Table 16–3, 2010: Table 17–22, 2023: Table 18–9).

The new reality prompted the huaqiao-huaren enterprises to look for alternative development paths. Those entrepreneurs who had invested in low-tech, labour-intensive production had to redirect funds to develop capital-intensive and high-tech industries and more actively develop the service sector. Lacking the capacity for such a transition, they were given the opportunity to relocate their enterprises to the central or western parts of the country to retain their business incentives. During the crisis, all these companies had to refocus on the PRC domestic market.

In 2013, China’s new leader, Xi Jinping, launched China’s ‘One Belt, One Road’ initiative, which aimed not only to significantly increase foreign economic co-operation, but also to develop all of the country’s coastal and, in particular, central and western regions through which the ‘One Belt, One Road’ routes would pass. From the outset, the country’s leadership viewed the huaqiao-huaren as an essential tool for the implementation of this initiative. The Chinese diaspora in the five Southeast Asian countries that are ASEAN members — Indonesia, Malaysia, Singapore, Thailand, and the Philippines — was expected to play a special role in the initiative. The overseas Chinese hold leading positions in the economies of these countries, controlling from 10% to 100% of various sectoral markets, in particular, 45-100% of the domestic and foreign trade (Zhuang et al. 2011). Moreover, almost all foreign trade with the PRC is mediated by the Chinese diaspora. As part of the ‘One Belt, One Road’, the PRC is implementing major infrastructure projects with the support of the Chinese diaspora (e.g. the Bangkok-Rayong railway in Thailand, the Sihanoukville SEZ in Cambodia). All this suggests that the overseas Chinese play a key role in the development of China’s trade and economic relations with the ASEAN member countries, which form the backbone of the maritime part of the “One Belt, One Road”, the 21^st century Maritime Silk Road.

The Chinese government’s anti-crisis measures of 2008 encouraged most overseas Chinese enterprises to complete the transition to capital-intensive, high-tech production or to migrate to the western or central regions of the country. At the outset of the initiative, the capital of the overseas Chinese diaspora was estimated at around USD5 trillion, and the stock of overseas Chinese investment in the PRC exceeded USD885 billion, accounting for 60% of the FDI stock (calculated from: Zhongguo shangwu tongji nianjian 2014). To attract more resources from the Chinese diaspora for the implementation of the initiative, new benefits and preferences had to be granted to them.

In 2014, to deepen the integration of the Chinese diaspora into the PRC economy and support the construction of the 21^st century Maritime Silk Road, the Experimental Zone for Economic and Cultural Co-operation with the huaqiao (and indeed with the huaren, too) was established in the Shantou Special Economic Zone (Guangdong). In the same year, the first industrial cluster for overseas Chinese entrepreneurs (qiaomengyuan) was established in Tianjin to become a hub for the overseas Chinese capital and skilled workforce. By 2022, 17 such clusters had been built.

In 2017, the Income Tax Act provided additional tax benefits for entrepreneurs who donated more than 12% of their annual profits to charity. The amount donated in excess of 12% of the annual profit could be a deduction from the company’s taxable income for the following three years (Afonaseva 2022).

In 2019, the Chinese diaspora was included in the Guangdong-Hong Kong-Macao Greater Bay Area Region Development Plan³ for the medium and long term until 2022 and 2035, respectively (Yue gang ao dawanqu fazhan guihua gangyao 2019). In November 2019, the First Overseas Chinese Congress on the Guangdong-Hong Kong-Macao Greater Bay Area region was held in Guangzhou (Shoujie huaqiao huaren yue gang ao dawanqu dahui fachu changyishu 2019). The huaqiao-huaren were viewed as an important driving force for the development of the region. Proposals published by the Congress outlined new business and career opportunities for the overseas Chinese.

In January 2020, the Foreign Investment Act (2019) and its implementing regulations came into force, cancelling all previously enacted legislation regarding foreign investors. Foreigners were granted equal rights with domestic investors in several areas (state support, government procurement, allocation of funds and land, granting of licences, reduction of taxes and fees). Foreigners were granted additional rights and privileges (regarding identifying standards for the company, public offering of shares, additional regional preferences, financial and tax preferences, preferential banking, preferences for reinvestment of profits in the PRC, free transfer of income and credit proceeds). The Act guaranteed the protection of intellectual property rights, including related rights. At the same time, it tightened controls on compliance with PRC legislation. Foreign enterprises of all types established before 1^st January 2020 were required to re-register within five years and bring their operations into compliance with the new requirements (Afonaseva 2022).

The new regulations applied to the huaqiao-huaren wherever they were more favourable than the previously enacted and effective “State Council Regulations on Encouraging Investment by Chinese Emigrants and Compatriots from Hong Kong and Macao (1990)”. The huaqiao-huaren were in principle allowed not to re-register their enterprises. Their privileged position vis-à-vis foreign proper investors showed that the Chinese diaspora, estimated at 50-80 million people by 2021 (of whom 69.6% were based in Asia, including about 75% [of those] in ASEAN member countries, 19.5% in the Americas, 5% in Europe, 3.5% in the Pacific countries and 3.4% in Africa) (calculated from: Statistical Yearbook of the Overseas Community Affairs Council 2021), was the PRC’s high hope for the development of new and high technologies and independent innovation.

The reality of doing business in the PRC from the late 2000s to the early 2020s stimulated the growth of direct investment by the overseas Chinese, while there was no growth or even a decline in foreign proper investment between 2008 and 2022. After the 2008-2009 global financial crisis, foreign proper investors did not return to their peak investment level of USD43.6 billion in 2008. However, those overseas Chinese investors who had completed the transition from labour-intensive to capital-intensive production, actively developed high-tech industries and relocated some of their enterprises to the western or central regions of China proved to be much better adapted to the changing environment and, as a result, generated a significant increase in FDI between 2008 and 2022 (see Figure 6).

Investment by the overseas Chinese grew particularly strongly as a trade war with the US and an outflow of Western capital from the PRC began in 2017. Over 2017-2022, the huaqiao-huaren direct investment in the PRC increased by nearly USD50 billion, while their share of the total FDI approached 80% for the first time since the start of the reform and opening-up policy (see Figures 6, 7). Hong Kong remained the main source of FDI to the PRC in 2008-2022, followed by Macao, Indonesia, Malaysia, Singapore, Thailand, the Philippines, and offshore zones. Geographically, investment by the overseas Chinese covered the whole of mainland China.

As a reminder, in 2017-2022, the business infrastructure for the overseas Chinese (industrial clusters, experimental co-operation zones) was actively developing in the PRC with the support of the government, the huaqiao-huaren were officially declared an essential factor for the implementation of the One Belt, One Road initiative, and were also included in the development plan of the Greater Bay Area. As a result, with the support of the country’s leadership, the overseas Chinese capital replaced some of the Western capital that had left the PRC market.

Overall, the number of new companies owned by the overseas Chinese continued to grow between 2008 and 2022. This growth was particularly strong in 2018, as the number of new foreign proper enterprises fell (see Figure 8) amid the trade war with the US and the beginning of the outflow of Western, mainly EU, capital.

The average direct investment per new enterprise owned by the overseas Chinese in 2008-2022 was USD4.6 million, 2.9 times higher than in 2001-2007. According to this indicator, overseas Chinese enterprises surpassed foreign-owned enterprises for the first time. This confirms the completion of the transition of overseas Chinese enterprises to capital-intensive production.

At that time, huaqiao-huaren-owned small and medium-sized enterprises were actively tapping into high-tech sectors of the economy. In particular, 57% of the 150 companies owned by the overseas Chinese that won the government’s Key Business Teams of Chinese Emigrants and Overseas Chinese competition in 2009-2013 were engaged in high-tech industries, including 33% in biopharmaceutics, 13% in telecommunications, 8% in high-tech equipment manufacturing, and 3% in eco-friendly manufacturing (calculated from: Long (ch. ed.) and Zhang (ch. ed.) 2014). In 2021-2023, almost all of the 70 shortlisted companies in the China Business Start-up Cup competition among the huaqiao-huaren operated in the high-tech sector, of which 32.9% produced high-tech equipment, 12.9% developed new energy sources and connected cars, 12.9% developed next-generation IT technologies, and 5.7% developed health-oriented biotechnologies (calculated from: Lists of projects shortlisted in the 8^th and 10^th China Business Start-up Cup entrepreneurship competitions).

By 2023, branches or subsidiaries of large enterprises owned by the overseas Chinese operated in almost all sectors of the PRC economy. More than 55% of these were in manufacturing, including 15% in food processing, 13% in engineering, 12% in semiconductor industry, 5% in chemicals, 4% in textiles and clothing, and 2% in pulp and paper. More than 36% of these branches and subsidiaries were engaged in services, including 10.5% in finance (of which 6% in banking), 9% in real estate, 5% in IT services and 4% in wholesale and retail trade. More than 5% of the enterprises were engaged in construction, more than 1% in metal extraction and 1% in transport and logistics (calculated from: Kang et al. 2009; YZZK 2007-2019). These figures illustrate the widespread presence of Chinese diaspora enterprises in the PRC economy.

The PRC leadership has rationally used the resources of the Chinese diaspora for the sake of the national economic development, integrating them from the outset in the strategic plan for socialist modernisation, and subsequently in all major initiatives and projects, such as One Belt, One Road, the Greater Bay Area regional development plan, and others. The huaqiao-huaren have enjoyed special preferential treatment in the PRC, which has put them in an advantageous position compared to domestic or foreign proper investors. This treatment allowed the overseas Chinese to maintain their economic incentives during the Asian financial crisis of 1997-1998 and the global economic crisis of 2008-2009, to become the leaders in terms of the amount of investment in the PRC compared to foreign proper companies, and to replace some of the Western companies that left the PRC after 2017 due to the trade war with and sanctions imposed by the United States.

Over 1979-2023, Chinese overseas business in the PRC moved from the original accumulation of capital and labour-intensive production of export products (1979-1991), to capital-intensive production of export products (1992-2007), to high-tech production and development of the domestic market and service sector (2008-early 2020s).

To date, the overseas Chinese do business in all sectors of China’s economy. However, manufacturing has been their primary business focus throughout the reform and opening-up period, except for 1979-1987. This was important for the PRC’s industrialisation drive in the 1980s-2000s, and remains relevant today, as many companies owned by the overseas Chinese are actively tapping into high-tech industries, including new and strategic industries.

Judging by the scale of events, programmes and competitions for entrepreneurs, the benefits of overseas Chinese businesses to the country are significant. The overseas Chinese investors have proven to be more reliable than foreign proper investors while being more flexible and more capable of innovation, adoption and in-house development of new technologies than domestic entrepreneurs. This is why the overseas Chinese (and indeed the Chinese with foreign citizenship) are incorporated into all projects of importance to the state.