This article analyze the evolutions of China's foreign direct investment (FDI) policies, the policies that contravene the Agreement on Trade-Related Investment Measures (TRIMSs) and General Agreement on Trade in Services (GATS), and the impact of China's Accession to WTO on China's FDI Policy and Taiwanese businesses. This article find the accession to WTO will speed its opening process in such areas as energy, transportation, telecommunications and environmental protection. At the same time, China's doors will open wider to foreign investment in service sectors ranging from banking, insurance, to tourism, commerce and trade. In order to offset the negative impact of trade liberalization on these industries and promote industrial upgrading, China will continue its policy of "market in exchange for technology". China will gradually shift to a policy of preferential treatment to selected strategic industries rather than selected regions, take the initiative to adjust the industrial policies to support its capital-and technology-intensive industries, welcome foreign companies to set up R&D centres or invest in new-and high-technology, and the foreign investors will be encouraged to participate in China's SOE reform and reorganization in the form of equity holding, leasing, acquisition, and joint operation. For Taiwanese businesses, China's accession to WTO willreduce uncertainties in the business environment and increase the marketing and distribution channels available, Taiwanese businesses will begin investing in transport, storage, distribution, travel, real estate, finance, information, accounting, legal, telecommunication and network services. This trend will produce cross-strait strategic alliances in the service sectors. However the producers of petrochemicals, IT technology products, and auto parts will face global competitors in the mainland market. If the products of Taiwanese businesses lack an inherent price, quality or quantity advantage, will lose the ability to compete in China market. The rapid development of the mainland's information technology is also likely to encourage Taiwan producers of information electronics to increase their investment activity across the strait, reducing the technology gap between the two sides. Hence Taiwanese businesses shall assess whether or not the products are able to compete internationally in terms of function, price and service, strengthen the design capability, production and sales operations and take cooperative strategies to expand China market channels through collaboration, joint ventures, mergers, acquisitions, and strategic alliances, cooperation with state-rum wholesalers or foreign enterprises.