 Showing that government policies that restrict FDI and fail to improve the financial system can be counterproductive, but that policy-makers should encourage domestic and foreign-invested firms to increase the benefits of inward FDI.This suggests that FDI is important in alleviating the financial constraints of private firms.In the late 1800s, foreign imports from British India of cotton yarn had created a large market for weavers in the countryside of Northern China.