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Assess The Challenges And Opportunities Facing Foreign Investors Seeking To Invest In China

2519 words - 10 pages

Assess the challenges and opportunities facing foreign investors seeking to invest in ChinaIntroductionChina has become one of the most fast growing countries in the world since economic reform and market reform in 1979. The impressively booming economy and good investment environment attracts more and more world's capitals seeking to invest in China, however not only opportunities but also challenges are facing to foreign direct investment (FDI). This essay will examine the challenges and the opportunities of China faced by foreign investors via Political aspect, Economic structure aspect, and Social aspect. Firstly, in the political aspect I will present the policies of FDI in China as an opportunity factor and the challenges come from the new taxation system and fragile implementation of Intellectual Property Law. Secondly, in the economic structure aspect, I will mention the opportunities by discussing large market size, fast growing economy and good infrastructure in China and the challenge is from the increasing labour cost. Finally, in the social aspect, the challenge is from rising nationalism will be discussed. On the other hand, the growth of Chinese education level becomes an opportunity for foreign investors.Main bodyIn the political facet, China initiated "Open-door" policy and started market reform in 1979, since then, Chinese authorities intended to attract FDI as an important goal and the priority on the government agenda. A series of preferential policies were issued to improve investment environment in order to attract foreign capitals to invest China. In order to create a better investment climate, Chinese government set up Special Economic Zones (SEZs) in 1989. There are more liberal investment and trade regime than other areas in the Special Economic Zones. Since 1996, the western and central provinces authorities were entitle to give approval to foreign invest projects which the foreign capital below US$30 million. In the 1999, Chinese government started to implement "Western Region Development Strategy", more preferential treatments are offered to encourage foreign capitals to invest in western provinces and other inland cities. For instance, preferential tax policies, foreign companies can enjoy 50% reduction of corporate income tax for 3 years. China has been very successful in attracting FDI, Yadong Luo indicates that, "Currently, China is the second-largest FDI recipient in the world, with only a small marginal difference placing it behind the United States" (2001, 4). Until now, Chinese government is still working on attracting world capitals, especially when China's accession to WTO, Chinese authorities promise further FDI liberalization, therefore, foreign investors can invest more easily in China, and government issued financial preference help multinational companies decrease operation cost and enhance their profitability.Nevertheless, the Chinese authorities have already shift their policy, because unified tax...

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