2.Advantages of investing in China2
2.1 Abundant human and energy resources2
2.2 Development in relevant infrastructure and openness to international trade3 3.Disadvantages of investing in China3
3.1 Low income of people3
3.2 technology and unequal investment3
4.Benefits for FDI in China4
4.1 Economy is affected in many ways4
4.2 trade expansion4
5.Evidence of the negative effect for FDI in China4
5.1 FDI threaten local enterprises and capital transfer4
5.2 Unbalanced investing5
5.3 Environmental problems5
The impact of foreign direct investment in China
Foreign direct investment (hereafter referred to as FDI) has created significant impacts in China after the Opening-Reform in the late 1970s, China has been successful in attracting FDI, which has been played an crucial role in the economic development of China. China has now become the second largest foreign direct investment (FDI) beneficiary country in the world following the US. Annual FDI inflow was below $US100 in 1979, but exceeded $US580 billion in 2006, with an annual growth rate of close to 30%. (Fung et al. 2004). This trend is expected to continue in the foreseeable future, especially given the country’s entry into the WTO. Many advantages can be identified in FDI, including boost employment rate, calculate capitals and increase domestic competitive. On the other hand, there are also some drawbacks of FDI in China. This essay will start with a display of the advantages and disadvantages of investing in China, then describe benefits and drawbacks brought by FDI and finally provide several correspondence suggestions.
Advantages of investing in China
2.1 Abundant human and energy resources
China has a large population of approximately 1.3 billion indicating a huge consumption power and market. The purchasing power of Chinese people is increasing dramatically in the last decade, which means China could attract more and more FDI in the future. (Tarun, 2012). Furthermore, China has resource availability and low cost of labor force, which means investors can easily employ enough workers with a relatively low cost. The country is also rich in energy resources. Foreign corporations could obtain a variety of resources when investing in China. China is the largest producer of coal in the world is an appropriate example for this. (Zhang, 2002 see in Tarun, 2012). Therefore, China is an excellent destination for investment. (Callaghan & Cassidy, 2003 see in Tarun, 2012). 2.2 Development in relevant infrastructure and openness to international trade China has been striving to improve related infrastructure, which contributes to attract FDI. For example, highways, railways and interior transport waterways have adjusted according to the host province. It is always true that the availability of physical infrastructure significantly influences the decision of investment particularly in a foreign land. Moreover, China has implemented economic reforms and Open Door policies. Meanwhile, China has put efforts in promoting trade by adopting several bilateral and unilateral trade arrangements and actions such as reducing tariff barriers. (Tarun, 2012).
Disadvantages of investing in China
3.1 Low income of people
There are some disadvantages for investing in China. Firstly, the income of people is relatively low in China. The production capacity is growing but the low per capital income may lead to periodically saturation, which makes it difficult for foreign companies to develop. (Tarun, 2012). .
3.2 technology and unequal investment
In terms of technology disparity and lack of labor qualification in some certain areas may also need to improve. Furthermore, unequal investments in different sectors are another key disadvantage in China. For example, there is saturation in traditional sectors but not many investments in chemical and...