Using a firm-level survey, this study examines the effects of foreign direct investment and foreign technology on local Chinese firms. The empirical results suggest that knowledge inflow carried out mainly through direct foreign investment is an important conduit in promoting Chinese firms' export. Moreover, foreign knowledge is likely to increase local firms' total employment and production, especially in the short-run. In addition, local non-affiliate firms can benefit through business dealings with those firms directly associated with foreign businesses. The study also explores the possible contributing factors related to foreign technology transfer, such as domestic competition and employees education level.