Foreign Direct Investments in China - Dissertation Example

It is becoming the developing world's largest recipient of foreign revenues and achieving the status of fastest developing economies in the world in the process. The case of China is often largely cited in the literature as one of the successful stories, of FDI investments. This essay on FDI in China aims to discuss various critical issues related to the policies and strategies implemented by the Chinese government to attract foreign funds, the status of the labor market in China before and post the introduction of FDI, the political framework, the labor market conditions and the availability of infrastructure, etc among others.

It also discusses the relationship between labor market conditions and their impact on FDI with the help of various case studies and examples.Foreign direct investment in China is by far one of the greatest success stories in terms of attracting international investments across all sectors during the past couple of decades. The People's Republic of China through its revolutionary economic policies managed to attract significant foreign investments surpassing almost all the developing countries in a relatively short period of time.

From a humble beginning of 100 foreign-owned firms in 1979, China rapidly catapulted to a position of one of the most attractive destinations for foreign investment. By 1998 the number grew to as many as 280,000 (See Appendix Table 1) (Facts and details, 2012).A significant reason for the radical increase in inward FDI in the country is attributed to the large-scale economic reforms and open-door policy adopted by it. According to these policies, Special Economic Zones were created in four major cities in China, in 1979.

The key objective behind this strategic move was to gain experience and expertise in international technologies as well as management skills and boost the country's economy in the process (Wei, 1995). This move was followed by the opening up of fourteen other cities to foreign firms in the year 1984 whereby concessions were offered to foreign firms to lure them into investing in the SEZs which included the provision of special facilities for funding and infrastructure development (Yeh, 2000).

As a consequence of such persistent efforts on the part of the Chinese Government more and more cities were made accessible to foreign firms, thus successfully reducing unemployment and promoting economic growth. With increased attention from the international investors and the economic reform policies, China managed to attain membership in the WTO thus officially marking its entry into the international club (such as IMF, and World Bank). This further helped the country in garnering more attention from international investors (Howell, 1993).

The various key issues related to FDI in China such as historical origins and background of FDI investments in the country; key trends, trends, and stages of FDI development; influence and role of the labor market on FDI; the market size and structure; labor market conditions; availability of infrastructure, the political framework, and introduction of policies that drove foreign firms towards the Chinese markets, etc are discussed at length in the following sections. Furthermore, the explanations are then supported by examples and case studies (Foxconn).

Finally, the impact and implications of FDI on the Chinese economy are discussed.