Foreign Investment In China Essay

3875 words - 16 pages

Foreign investment is the acquisition by residents of a country of assets abroad. There are two types of foreign investment, known as foreign direct investment (FDI) and foreign indirect investment (FII). By definition, FDI is defined as the acquisition by residents of a country of real assets abroad which includes acquiring of land, constructing buildings, mines or machinery, or buying existing foreign businesses. On the other hand, FII or portfolio investment is the acquisition of financial assets abroad, for example represent equity investments, debt investments, intergovernmental loans and bonds.There are significant differences between FDI and FII. Firstly, the objective of FDI is to gain managerial control of activities in the country of investment. Foreign owned enterprise would easily operate their activities in the host country and reduce other costs that might affect them if they perform their businesses from their home country. Contradictorily, FII objective is to gain short to medium term profits. Therefore, foreign investors would invest in a portfolio which expected to give them better returns in the future and hence lead to profit acquisition.The second difference is on the type of investors. Most of FDI is usually involve multinational corporations. These are the companies that operate, own and control production facilities in several foreign places. However, FII could be carried out by any individual or even speculators that would like to take an advantage of the foreign exchange.Thirdly, is the difference in terms of asset liquidity. FDI assets are highly illiquid because most of the investments are in terms of real assets and they cannot be sold quickly and the price they will fetch is very uncertain. However, FII are in terms of financial assets and are easily turned into money rapidly at a fair and predictable price and consequently, this type of investment is highly liquid.The fourth difference is in terms of the time period of investment. FDI has a primarily long term considerations. The reason is that, the foreign investors are not only investing funds to the host country, but also other assets such as factories, plants, facilities, and machines which are difficult to move from one country to another. Conversely, FII usually has short term investment goals since, the foreign investors would tend to speculate as soon as they realized that the currency of the host country depreciates or the currency of its home currency appreciates to a substantial value that would profit them.The fifth difference is on the activities of the two types of investment. For FDI involves activities of remitting money abroad to be spent on acquiring manufacturing, marketing, distribution, properties and services. For instance, the Fosters purchase of a brewery in Tianjin, is considered as Australian's foreign direct investment in China because there is a deficit item in Australia's capital and financial account, and a surplus item in China's...

Find Another Essay On Foreign Investment in China

Foreign Direct Investment In KOREA Essay

2072 words - 8 pages seemed much easier to control than direct foreign investment. This growth policy of preferring foreign debts to investment continued until the early '80s.After Korea joined the OECD in December 1996, the government exerted itself to continue liberalization up to the level of advanced countries. The Foreign Capital Inducement Act was amended to become the Foreign Direct Investment and Foreign Capital Inducement Act in February 1997, which spelled

Foreign Direct Investment in Vietnam Essay

2503 words - 10 pages inefficient, thus resulting in decrease in FDI. 3. Investment environment is a decisive factor to deterred foreign investors. At that time, many shortcomings of Vietnam's investment environment emerged more evidently than ever through a number of failing joint ventures. 4. Together with our weakness is the emergence of new attractive markets from neighbor countries, such as China, India and Indonesia. As compared with Vietnam, these 3 countries have a

Foreign Direct Investment (FDI) in E-commerce in India

3040 words - 12 pages India needs to comply with other statutory laws in force in India, like Indian Contract Act and Foreign Investment Regulations. E-Commerce companies also require complying with banking and financial laws, wherever applicable. Laws regulating e-Commerce in India are still evolving and lack clarity. This poses a challenge for potential entrants and existing players. Furthermore, the lack of law firms or lawyers specializing in e-Commerce laws

Role of Foreign Direct Investment, Aviation and Foreign Policy in India

2549 words - 11 pages Chapter 1 - Introduction Introductory Background: Role of Foreign Direct Investment Foreign direct investment is an investment made either by a Multi-National Corporation or by an individual in any organization or a sector of home country. The MNC or that individual earns private return from that organization by gaining some control over that organization. Foreign investments can either be direct or indirect. The direct investment, on one hand

The possible effects of the UK entry into the Euro on foreign trade and foreign direct investment in the country

1491 words - 6 pages store C&A trading in Spanish centres, and Robert Bosch manufacturing car alternators in South Wales.Foreign Direct Investment (FDI) raises many controversial questions and they are debated in many countries: when a country receives large inflows of FDI, the positive side is enhancement of productivity and employment, but the negative side will concern the issue of strengthening foreign control of its industry and commerce. On the opposite

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

1925 words - 8 pages 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

DOES COLLECTIVE BARGAINING DETER FOREIGN DIRECT INVESTMENT IN THE VEHICLE INDUSTRY

2402 words - 10 pages poor productivity related to strikes as a result of poor collective bargaining. This portrays a very poor imagine to foreign investors. This was further confirmed by the BMW strike that the unstable labour affected South Africa’s opportunity to manufacture a new vehicle. In 2013 the BMW yearly manufacturing decreased by 15.8%. In order for manufactures to stay committed to the current investment reassures the (organized labour) to focus on

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

With Reference to at least three companies of your choice, critically evaluate Dunning's Eclectic Paradigm as a framework explaining the reasons why companies engage in Foreign Direct Investment

3043 words - 12 pages "Technological changes; particularly in the space-shrinking technologies of transport and communication, in unison with the overall decline in trade barriers, help to make possible the internationalisation of economic activity and also the development and geographic spread of companies (Dicken pp 120, Adapted)." These revolutions have induced the explosion in Foreign Direct Investment (FDI) in the last 20 years.FDI is the principle way that

How can Republic of Korea foreign policy towards Japan and China affect the United States in the region?

1317 words - 6 pages , South Korea’s foreign policy has shown continuity in its overall strategy towards China. There are, however, constraining factors that limit continuation of South Korea’s relations with China, mainly, China’s recent reluctance to rein in North Korea. Indirectly, this factor is affected by the Korean-US military alliance. This section proceeds in three parts. First, this section discusses the points were South Korea and China have strengthen

Foreign Direct Investment: Always a Good Choice

1206 words - 5 pages 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

Similar Essays

Foreign Direct Investment In China Essay

1543 words - 6 pages Foreign Direct Investment in China 1.0 Introduction 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

The Impacts Of Foreign Direct Investment In China

3592 words - 15 pages 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

Foreign Investment In Indonesia Essay

1102 words - 5 pages contribution of 46.4 % and a value of U.S. $9.8 billion. China has entered into the top ten largest state investment in Indonesia, but not the top five. If it’s seen through from the industrial sector, most foreign investors have invested in transportation, storage, and telecommunications amounted to U.S. $3.8 billion. The second largest sector is the mining about U.S. $3.6 billion. And then continued by electricity, gas and water at U.S. $1.9

Foreign Investment In Australia Essay

2902 words - 12 pages Foreign Investment in Australia is vitally important if Australia is to stay economically viable in terms of globalisation. It benefits the Australian economy in relation to international trading. T he injections of funds will support the economy by boosting industry as well as the increasing job security2.0 INTRODUCTIONForeign investments are the funds invested in Australia by any other country throughout the world. Foreign investment is