The Advantages and Disadvantages of China's Current Foreign Investment Environment

Topics: Investment, Economics, Economy Pages: 6 (1640 words) Published: June 25, 2013
The advantages and disadvantages of China's current foreign investment environment


Introduction and Backgrounds3
Advantage: Good economic environment3
Advantage: Stable political environment4
Advantage: Acceptable infrastructure5
Advantage: Abundant labor5
Disadvantage: The laws of the market economy system are not perfect6
Disadvantage: Low government efficiency7
Disadvantage: The low efficiency of the financial sector7
Disadvantage: The investment environment and labor distribution has regional differences8
Disadvantage: Resources and environmental constraints9

Introduction and Backgrounds
Since the reform and opening up, China's utilization of foreign investment is developing constantly. Along with the continuous improvement of the investment environment, the scale of foreign investment into China has been continuing expanding, which making China became the world's second largest inflow of funds country. In the backdrop of China's own economic development, in 2010, China became the second largest economy in the world, with a 5878.6 billion dollars GDP at the same year.① Inside the country, foreign investments forming a large-scale foreign economy, and made important contribution to China’s economy and pushed it into the international economic system. I would like to talk about my own views about China's current foreign investment environment, and analyze its opportunities and challenges. The quality of investment environment is directly related to the ability to attract high-quality foreign capital investment. Investment environment affected by many factors, and these factors work together, such as national macroeconomic policies, the basic management system of national government, the level of infrastructures and so on. First, I’d like to analyze the advantage of China's current foreign investment environment, which directly related to the opportunity for China to attract foreign investment. Advantage: Good economic environment

A country's economic environment determines the future direction and development of the country's economy, while China is in a good momentum of economic development stage. China's macro-control policies become more and more mature after years of development, and have accumulated a lot of valuable experience. These policies have played a catalytic role for the country's overall economic development. In order to develop an opening-up economy, in 2001, China became a member of the WTO, provided a good opportunity to make China's economic more opening to the outside world and provide better investment environment. By accepting new things and developing China's own economic growth model, the level of China's economic grows rapidly. China has a strong domestic purchasing power, which reflects China's huge market size and market potential. According to the effective demand theory of Keynes, due to the economic crisis, there is a lack of effective demand in western countries. Effective demand makes up with consumer demand and investment demand. Diminishing marginal propensity to consume, diminishing marginal efficiency of capital and liquidity preference is the three major social and psychological factors resulting in lack of consumption demand and investment demand, and then reduce the investment rate in developed countries.② Thus, more foreign investors would turn to find a better place to invest, it is the opportunity of China's foreign investment environment. Advantage: Stable political environment

Since China's reform and opening up, people's living standards continue to improve, China’s international status and international influence also has been enhanced at the same time. China could maintain a stable developing social environment. This is the basic guarantee of the investment environment. For example, the reason why Wal-Mart invested a large amount of money on shopping plaza, Sam shops, and community shops...
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