This study aims to analyze the influence of foreign direct investment in China’s tourism industry since the late 1970s, when the Government reopened China to foreign direct investment (FDI). China’s rather turbulent economic history and political policies in different periods, the imbalance of the development process across geographic regions, and the variety of types of inbound FDI provide the bases of comparison in this dissertation. Influences of FDI on the tourism industry are different in coastal and inland regions from three tourism-related sectors: the hotel sector, tourism features and travel agencies. In order to clearly illustrate this dissertation, two concrete questions are focused on, that is, what is FDI and what roles does FDI play in China’s tourism industry and, what policies did the Chinese governments undertake to react to different situations when they realize the impact of FDI on the development of China’s tourism industry? Last, by comparing tourism-related FDI in China with that in India, some suggestions are made concerning how to improve efficiency of FDI in the future.