8.1 Tony Li
We all know that the foreign investment is a necessary part of global expansion. Many developed countries prefer to invest developing countries. For instance, the US has invested much more fund in China. Since the initiation of its market reforms in the 1980’s. China has been a preeminent recipient of foreign direct investment (FDI). Until 2011, there is over $1.2 trillion have been invest in China as foreign direct investment, it made Chinese industries has been transformation, and contributed enormously to the nation’s industrial output. In addition, the more foreign manufactures, the more Chinese subsidiaries have dominated (Wei, Xiao & Yuan, 2014).
When a multinational company announces as new project in a poor county, it is usually a Sause for celebration. Especially when this project would not hurt the environment
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However, FDI will limit their local companies, and they would not have their own companies. Also, it will bring extra competition. Otherwise, competition may not a good thing for economy. It may destroy their local companies. So in some countries, they cannot allow foreign direct investment (Jain, 2015).
In Shanghai, there are many foreign investments have left. Because of change, those investors have frustrated about the economy in Shanghai as well as the worse and worse environment. They could not bear the bad weather even in Hong Kong (International Business Times, 2015). We should that China have a great change in economy and abstract lots of foreign company to invest in China. However, the increasing rent, labor, pollution. That make too many companies consider that China is still a better place to invest. And now, India and Vietnam may be a next choice for them to invest.
Reference:
Citizen.org. (2016). Trans-Atlantic Free Trade Agreement (TAFTA). Retrieved October 21, 2016, from:
It will be advantageous for the company if they can project themselves as responsible corporate citizen and an environment friendly company. Social enrichment schemes, recycling schemes and educational funds can be initiated to cater to this cause and long term goal.
I believe that one of the best investments I could make would be an FPI (foreign portfolio investment) into state-owned industries in China. Announced on April 23rd, the government has opened 8 state-controlled industries to investment. I’d recommend FPI (as opposed to FDI) in this venture because, while China is opening these industries up, they are not opening them up for control. Still, companies like Sinopec Ltd., a large oil company, are up to selling about 30% of the SBU that controls its filling stations, a unit valued at over $20 billion. As the middle class continues to grow and be able to purchase more items (like cars), the huge population’s demand for necessary products like these will continue to grow. Companies like Sinopec are adamant that they will not give up any control, and that’s why FPI would be preferable to FDI when it comes to these industries. Another significant reason that I’d prefer FPI over FDI in China is due to risk (political, socioeconomic, etc.) These companies say the reason they won’t lose control is because they don’t want to have to change their operational practices. With FPI, these companies won’t get paranoid that investors are trying to change them. The previous reasons are very specific, but China has general policies, procedures, and trends in place (good or bad) that make it plain for investors to see that they are wanted, and business is a priority. China has an autocratic government, which is very efficient in getting things done, so it is more conducive for companies to work in. China also has very low wage costs ($1.74 per hour). Also, China has some of the least progressive environmental regulations laws, which lowers costs. China’s GDP growth rate is still at 7.5% (14th in the wor...
I found this article "Foreign direct investment: Companies rush in with the cash" on the financial times website (www.FT.com) published December 11, 2002 written by John Thornhill. The reason for choosing this article is my personal interest in the Chinese economy and its attractiveness to the foreign investors. Apart from the foreign direct investment this topic has also helped me in understanding the impact of Chinese economy on the global market.
One of the most well accepted models of FDI is Buckley and Casson’s (1976) internalisation theory, who developed a model of MNCs and FDIs centered around the interrelationship between market imperfections, knowledge and the internalisation of production and consumption (Buckley and Casson, 2009). Specifically, the theory recognized that multinational corporations are both horizontally and vertically organized, and that the “the vertically integrated firm internalises a market for an intermediate product, just as the horizontal MNE [multinational enterprise] internalises markets for proprietary assets” (Caves, 1996: p.13). In addition, internalisation will occur, and multinational corporations will expand only as far as the advantages, including barriers to entry, are not offset by the costs of control, communi...
International investing is something that many investors find that they can benefit from for many reasons. Two of the main reasons why investors choose to invest in foreign markets are growth and diversification. Growth allows investors the potential to take advantage of new opportunities in foreign emerging markets. International markets can potentially offer opportunities that might not be available in the United States. Diversification allows investors to spread out their risk to different markets and foreign companies other than those just in the United States allowing them to potentially create larger returns on their investment as well as reducing risks. (U.S. Securities and Exchange Commission, 2012) While investing internationally can be a very lucrative and rewarding decision, there are also extra risks involved with investing internationally. One of the main risks that international investors encounter is foreign exchange risk also known as currency risk. Currency risk is a financial risk that is created by contact with unforeseen changes in the exchange rate between two currencies. These changes can cause unpredictable gains or losses when profits from investments are converted from a foreign currency to the United Stated dollar. There are precautions that can be taken by investors to potentially lower their risk of currency value fluctuations and other risk factors that are present in international investing. (Gibley, 2012)
FDI tends to focus on opportunities in the same continental region. This often reflects attempts by multinationals to build up regional networks starting near their home base. A major conceptual problem with Porter's model is due to the narrow definition he applies to FDI. Porter defines only outward FDI as being "valuable in creating competitive advantage" and that inward FDI is "not entirely healthy" . He also states that foreign subsidiaries are importers, and that this is a source of comparative disadvantage .
Control: the host countries are threatened by the investment of large multinationals. In fact, big companies impose their rules due to the size of their business activities. Actually, big multinational controls the price and quality of production abroad. As a matter of fact, the issues have a negative impact on the local market and workers. Some governments implement special policies to limit the ownership of foreign investors in their markets.
With a population of 1.357 billion (2013)3, China is the most populated country in the world. Along with the huge population comes a market that is unmatched by any other country of the world. Both domestic companies and foreign companies want to tap into this large market that just recently embraced capitalism and entered into the World Trade Organization.
In the year 2007, China and India ranked first and second respectively in the list of ideal foreign direct investment (FDI) destinations, according to A T Kearney, a global strategic management consulting firm (The Press Trust of India Limited, 2007a). The two nations, because of their similarities in geopolitical, economic and demographic aspects, are often compared with each other. To determine which one is more attractive for businesses to expand to, this essay will examine the business environment of both countries from the following perspectives: political/legal, economic, socio-cultural and technological.
China's development is praised by the whole world. Its developments are not only in the economic aspect, but as well in its foreign affairs. Compared with other developed countries, China is a relatively young country. It began constructing itself in 1949. After 30 years of growth, company ownership had experienced unprecedented changes. Entirely, non-state-owned companies can now be more involved in sectors that used to be monopolized by state-owned companies.
The presence of multinational companies in other countries often does not benefit the economies of these countries; poverty continues to increase despite the new jobs do not pay as well. Moreover, multinational companies are not subject to the same environmental and labor laws that are in the country.
Figure 1 shows the recent trends in FDI inflows of some developing countries. According to the UNCTAD report of 2011 China has the highest FDI inflows among all the developing countries like Hong Kong, Russia, Singapore, Brazil and India; because China has introduced FDI over 20 years ago and has progressively pursued foreign investment while adjusting its FDI policies. Since 1993, China has attracted the largest amount of FDI of all developing countries while increasing its levels of both exports and technological advancement
The environment is a shared responsibility among members of society: business entities, people and government. In recent years, it is becoming common to associate entities with apprehensions regarding water, air and soil pollution, hence, business entities play a vital role in the conservation of natural resources. As suggested by Eze et al., multinational companies can massively contribute in the promotion of the environment through innovations and improvements not only on the entity’s products but also in its methods. Stakeholders are influenced greatly by the environmental and social standing of an entity. So, they require that business entities provide products that are cheap and of good quality without leaving any harmful traces to the
The FDI level has been so low in previous years because of the regulation they have had to shy away foreign investments. In the retail sector for example, they established the Large Scale Retail Store Law, making large volume stores unable to do business in the country. They even resisted acquisition from foreign investors because of the fear is that new workers would restructure too harshly, cutting jobs and breaking long-standing commitment with suppliers.
China has also expanded their trading industries with countries such as South Korea, Japan, Taiwan, ASEAN, India, Russia and Hong Kong. This has not satisfied the Chinese greed for income as they also export and import goods to American countries, name...