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China and Foreign Direct Investment - Essay Example

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China and Foreign Direct Investment

The greater part of FDI in China has originated from other areas of Asia excluding Japan, Hong Kong which is a self governing region of china has the largest record, however the dominance of Hong Kong is illusory in that much of the FDI is from elsewhere, in fact the stock listed as Hong Kong source FDI in China is just Chinese domestic investment round tripped through Hong Kong. Additional FDI in China listed as Hong Kong in origin is in actuality from a variety of western countries and Taiwan that is sited in China via intermediaries. Unfortunately, published records do not exist to point out exactly how much FDI in China that is supposedly from Hong Kong is in fact attributable to other countries.
Foreign Direct Investment in its characteristic structure is described as a company from one country making a physical investment in another country for example building a factory (Allen et al 2005). The definition can also encompass investments made to purchase lasting interests in business ventures operating outside the economy of the shareholder. Over the past decade, the direction of foreign direct investment (FDI) in to and from Taiwan has experienced spectacular changes. Whereas the flow of FDI at best languished, the outflow ascended to extraordinary heights, with 20% of annual growth rate. Seeing that the international competitiveness of labour intensive industries in Taiwan reduced, they have shifted from offshore to cheaper labour cost places (Buckley & Mark 2002). Through this process the mainland especially china, has grown to become the preferred destination for Taiwanese FDI nevertheless considerable flows have also gone to the Americans and to Europe, a detail which has often been disregarded.
Meryll Lynch China (ML China) has been the most striking due to its outsized collection of cheap labour, its export advertising strategy which has shared favourably with Taiwan's returns in export-oriented FDI (Allen et al 2005); and the unique customs, language and family association links connecting ML China and Taiwan. Even though Taiwanese FDI in China was formally made acceptable in 1991; ever since 1978 China's policy of drawing flows of FDI had a substantial impact of ML china. In addition some sources report that even before 1991, Taiwanese capital has been moving indirectly to ML china via Hong Kong (Buckley & Mark 2002)
An imperative issues concerning Taiwanese FDI in ML China, on the other hand is long term maintainability. Due to the size ( most are small scale) of several of these venture projects and their repeatedly low value added and fundamental technology, they are not in line with ML China's current main concern of increasing the quality of inflows of FDI. This great share of small scale low technology ventures in ML China powerfully contrast to the sizes of Taiwanese FDI projects in other destinations which on average own considerably higher personified technology and possible valued added (Chow 2002).
The China Japan Link
The current developments in the economic trends have seen Japan and China emerge as the East Asia newly industrialized economies (NIE's) of the region. Other economic powers in the region include Taiwan, Hong Kong, South Korea, and Singapore and are united in an alliance called the Association of Southeast Asian Nations (ASEAN) ...Show more

Summary

The establishment of the foreign direct investment (FDI) is one of the major successes in the Chinese economy over the past ten years. This is indicated by the increase in stock from $ 19 billion in 1990 to $ 300 billion by the end of the year 1999, making China one of the leading developing countries according to the stock of inward FDI…
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