Essay on The Impacts of Foreign Direct Investment in China

Essay on The Impacts of Foreign Direct Investment in China

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This assignment focuses on the impacts of foreign direct investment (FDI) in China. Inasmuch as this assignment will explore factors that make China an attractive FDI destination; it will also examine positive as well as negative impacts of FDI on the Chinese economy. Inclusive in this assignment will be an evaluation of positive and negative impacts of FDI on the economy of China, coupled with a discussion on corporate social responsibility (CSR).

UNCTAD (2003) defines FDI as

… an investment involving a long-term relationship and reflecting a lasting interest and control by a resident entity in one economy ([the] foreign direct investor or parent enterprise) in an enterprise resident in an economy other than that of the foreign direct investor... (UNCTAD 2003: 231).

While the above definition reflects on what FDI is; the justification for choosing to explore FDI in China is drawn from multiple studies that also explored FDI in China. Evidence from Shan, (2002) suggests that at provincial level, labour quality, market size, average wage, and level of infrastructural development make China attractive. A study that sought to explore FDI determinants, in Guangdong province of China using firm micro-level data Ng and Tuan (2003) found that quota effects, firm size and transaction costs were significant factors for locational choice by foreign investors. The justification for choosing China is also drawn from a research by Fung et al., (2002) which revealed that United States direct investments in China are influenced by local market demand, whereas Hong Kong investments in China are in influenced by labour costs.

Fundamentally, a discussion of FDI calls for consideration of globalization because economies are inextricably...

... middle of paper ...

...: University of Nottingham.

Syntao, (2008). A Journey to Discover Values: A study of Sustainability Reporting in China.

UNCTAD (2003). World Investment Report 2003: FDI Policies for Development. New York/Geneva: United Nations.

Venables, T & Yueh, L (2006). The China effect. CentrePiece Autumn Available from: Accessed: 02/04/2014

Zhang, KH (2006) WTO, China and Asian Economies. Paper presented at: University of International Business and Economics (UIBE) Conference. Beijing, China, 24-25 June, 2006.

Zhang, Z (2004) Cross-cultural challenges when doing business in China. Singapore Management Review 26(1): 81

Zheng, Y & Chen, M (2006). China moves to enhance corporate social responsibility in multinational companies. Briefing Series–Issue 11. China Policy Institute: University of Nottingham.

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