Economic reforms implemented since 1978 have contributed to economic growth and prosperity in China. China has emerged as the largest host country for foreign direct investment, in that it receives enormous inflows and has concurrently become one of the largest suppliers of outward foreign direct investment projects. The institutional background of China’s investment and economic policies provides an understanding of the influence of foreign direct investment on economic development. Well-designed policies can attract more FDI inflows and contribute to greater outbound investment.