Since the beginning of the 1980s, foreign direct investment has been growing significantly throughout the world, and it has helped spur economic development and globalization. At the same time, China, as a representatively developing country, has merged into the world economy with amazingly high speed and become the second largest recipient of foreign direct investment in the world (J.Ying, personal communication, February 24, 2014). Reforms in the economic structure have gradually occurred throughout China since foreign investment has been playing an increasingly vital role in the economy. Thus, a large and increasing amount of discussion and analysis are focusing on the impacts of foreign investment on China’s domestic economy (Lau, C., & Garry, B, 2008). Recently, some people have argued that there are some cues implying a sluggishness in the foreign investment in China, and the role of the foreign investment as a contributor to Chinese net exports, industrial output or tax revenues is no longer as important as it used to be (Jia, 2011). Some even suggested that instead of assisting in expanding markets, the foreign investment had begun to exert negative impacts on China’s domestic economy. Nonetheless, in my opinion, foreign investment is still a crucial element of the Chinese economy, and it is exerting positive impacts on this system. In this paper, I will prove my point of view from three aspects. Firstly, foreign investment is promoting the development of Chinese economy. Secondly, foreign investment is benefiting Chinese economic balance. At last, I will reject the opponents’ view by demonstrating that foreign investment is encouraging the development of domestic enterprises.
According to my analysis, foreign investment ...
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...rprises to grow and adapt to the new economic environment.
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To begin with, this research exposed a FDI puzzle between India and China through analyzing the current economic condition. Prime, Subrahmanyam and Lin (2011) stated, "Given their growth records, large markets, and reformed economic systems, both China and India appear to be equally likely candidates for foreign direct investment. Yet, China has received substantially more FDI" (p. 303).
In accordance with remittances, direct monetary profit from the overseas Chinese has also come from the aspect of foreign direct investment (FDI). As Newland and Patrick explain that, “China has long worked to attract direct investment and open trade opportunities through overseas Chinese communities.” (Newland and Patrick 5) Arguably, that policy towards the diaspora has been used by the PRC for developing its economy domestically and internationally. This is because as Newland and Patrick further explain, remittances and foreign direct investment influence, “the incidence of poverty in their home countries, market development (including outsourcing of production), technology transfer, philanthropy, tourism, political contributions, and more intangible flows of knowledge, new attitudes, and cultural influence” (Newland and Patrick iv).
China is quickly becoming one of the world’s fastest growing economies in the world. With its rapid population increasing each year, it would seem plausible for them to have a fast growing economy. With that in mind, many foreign businesses have been looking into either investing in China or opening foreign businesses within it. Due to the high population it would be a given for them in that fact that there is high number of laborers and well as a cheaper cost for production of goods. This cost of production to labor ratio is an important factor for foreign businesses to take part in China’s growing economy.
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.
Wang, Y. (2013). Fiscal Decentralization, Endogenous Policies, and Foreign Direct Investment: Theory and Evidence From China and India. Journal of Development Economics. 103 pp.107-123.
The people Republic of China is one of the world’s most rapidly growing and developing economies. The introduction of China to foreign direct investment has given rise to a huge wave of multinationals from around the globe, establishing some important forms of operations and working in mainland China. (China Mike, n.d.)
Zhu, Y. & Warner, M. (2000). “An Emerging model of employment relations in China: a divergent path from the Japanese?” International Business Review, 2000, Vol.9 (3), pp.345-361. [03 April 2014]
By definition foreign direct investment is the acquisition of tangible assets such as machinery, land and factories; this type of investment are often between two companies- usually multinationals from different countries. FDI is one of the benefits of globalisation as it has a direct impact on aggregate demand having a follow on effect on technology, job opportunities and increased intellectual property owned by countries. In this essay I will discuss some of the factors that affect a country’s disposition to gaining foreign direct investment.
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.
One of the core benefits of global foreign direct investment is that it creates an opportunity for money to freely flow to any business around the world that shows any signs of potential growth in the future. This is in light of the fact that when investors choose to invest their money, the main logic behind this is that they expect some form of return from the investment. Additionally, the home country’s capital account will benefit from the inward flow from the returns on the investment.
The main concept discussed in this essay is foreign direct investment. FDI is, according to the OECD, “a category of cross-border investment made by a resident entity in one economy (the direct investor) with the objective of establishing a lasting interest in an enterprise (the direct investment enterprise) that is resident in an economy other than that of the direct investor.” Firms invest in foreign economies in order to exploit their particular advantages and FDI is the preferred process, as opposed to licensing or agreements and exports. The advantages that firms often possess are patented technology, managerial skills, marketing skills and brand names.
FDI is typically regarded as a mode of cross-border inter-firm collaboration which connects with important equity stake and efficient power in managerial decision making in international enterprises (de Mello, 1999). FDI is also an external factor which boost Thailand’s economic growth through employment, transfer of technology and knowledge and relocating manufacturing facility. However, there is increasingly movement of production base into China and India instead of Thailand. As a result, the Thai
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
Foreign Direct Investment, or FDI, is a type of investment that involves the injection of foreign funds into an enterprise that operates in a different country of origin from the investor” (economy watch). The determinants of foreign direct investment may be the socio-economic, financial and the cultural factors which usually have positive and negative effect on the foreign direct investment. The risk is attached to the determinants of foreign direct investment. This paper examines the major determinants of foreign direct investment exchange rate, market size, political instability, infrastructure, openness to market and military rule. Data constraints in Pakistan some determinants consider to be the inefficient.
In the previous section of our paper, we have shown how there is a redirection of FDI inflow to India from China. This FDI is taken in this model as capital investment(increase in capital for India and an equal decrease of capital from China). The following table shows the data of labor force and capital investment in terms of machinery and other