FDI: Broadly speaking, foreign private capital flows come in two forms: equity and debt. The largest type of equity flow, in fact the largest of all capital flow to developing as well as transitional countries, is foreign direct investment (FDI). FDI is generally a long term investment that involves significant management control. The World Bank defines FDI as investment made to acquire a lasting management interest (usually at least 10 percent of voting stock) in an enterprise operating in a country other than that of the investor. With FDI, equity holders are concerned with their returns over a period of years rather than weeks or months.
FDI is aimed at a very wide range of economic activities, making generalization difficult, but at least three broad groups can be identified. First, from a historical perspective, the largest share of FDI has been in activities related to a country's natural resource endowments, such as mining, agricultural production, and tourism. Second, some FDI in manufacturing is aimed at producing for the domestic market in the host developing country often with protection against competing imports. Third, an increasingly large share of FDI in recent decades has focused on firms engaged in labor-intensive manufacturing aimed for export on world markets.
China's FDI & WTO Accession
China re-emerged recently as the fastest growing economy in the world. World markets have been flooded with Chinese goods. Though China opened up itself to many Western concepts but the way different concepts have been adopted and used in China differ a lot from the West. The change was initiated but it could not be sustained at the level it was initiated.
Industrial reforms increased the variety of light industrial and consumer goods available and helped in establishing key industries like automobile. The leadership demonstrated its ability to adjust the economic pressure by adopting a variety of fiscal and administrative measures. The result of these policies changes and mixtures of central direction and local initiative was the creation of the hybrid economy, which the Chinese call a socialist commodity system influenced by market mechanisms. Much of the success represented a recovery from the economically disastrous Cultural Revolution period.
Many modern management concepts like decentralization of planning and decision making; the responsibility system with emphasis on individual accountability for production, the encouragement of private enterprise and increased technological development were then introduced to improve key industries. These reforms improved the status of management function in Chinese corporate or business culture. China still has greater challenges to face as it moves from a centrally planned economy to a socialist market economy on its accession to WTO.
Whenever any country is about to enter into WTO, WTO provides that country with a set of rules to follow. These rules are designed to apply in the operation of market economy. These rules treat the modern economic market according to its needs. These rules have utmost significance in improving the economy and its key industries. They solve the problem of poverty and improving the condition of economy as well as boost up the growth of economy. In particular substantially liberalization of Foreign Direct Investment (FDI) into