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Evaluate The Costs And Benefits To Modern Business From Engaging In Foreign Direct Investment

1925 words - 8 pages

Along with the constant deepening of modern international trade globalization, various economic elements of modern commerce such as: labor, goods, service and capital etc. have begun to span the geological border of each country and been widely circulated in the world under the promotion of the globalization. Especially the capital internationalization whose main form is international direct investment is the most frequent. The capital internationalization includes two dimensional contents: on one hand, it's an international of investor structure; on the other hand, it's also an international of enterprise organization structure, including the internationalization of enterprise headquarters, area headquarters, operation headquarters, capital headquarters or branch institution. The above two internationalizations supplement each other, develop the transnational operation network of the enterprise, promote the internationalized operation of the enterprise and reinforce or improve the international competition advantage of the enterprise.
According to the foreign direct investment questionnaire made by Ministry of Commerce in Chin in March of 2006, the current purposes of Chinese enterprises on the foreign direct investment include: 1. To transfer the domestic superfluous production and technology capacity of the host country. 2. To develop the foreign resource. 3. To study the latest foreign technology, management and marketing experience. 4. To explore foreign market to drive the export. 5. To speed up the enterprise's globalization course. 6. To evade the trade barrier.
The advantages brought by FDI on the modern enterprise operation:
1. FDI is the effective way to evade the international trade barrier
The global economic integration is the main trend of the development of current world economy. Some international organizations, such as WTO, are always applied themselves to promoting the trade liberalization and reducing the tariff wall among the countries. However, some non-tariff trade protective measures such as the anti-dumping policy adopted by the import country promote the enterprise to adopt the international direct investment manner to get round these non-tariff barriers.

According to relevant data statistics, the direct investment flow of Japan on EU and U.S. in 1980s was affected by the increase of anti-dumping cases of the two countries, and the foreign direct investment flow increased accordingly. For example: from 1980 to 1995, U.S. has launched 791 anti-dumping litigations, the defendant companies in 126 litigations adopt the foreign direct investment evading the anti-dumping to invest in U.S., most adopt the new establishment mode, some enterprises adopted the manner of purchasing the local enterprise or extending the scale of original direct investment enterprise. The experience of other countries also proves that the strict trade protectionism threat as the anti-dumping of the import country will finally promote the...

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