China Investments and Capital Availability - Essay Example

?Capital Availability China has turned into a hub for foreign direct investment thanks to its reforms in relation to its economy, where it is a market-oriented economy. This is to mean that the businesses already in China have a code of conduct, where private enterprises avail a given number of stocks so that foreign investors can buy them (Hung et al. 2007, p. 400). With this in mind, this has provided capital for the companies to expand even further as there is a steady flow of funds, and the only direction of the company is forward. This is evidenced by the lack of good performance by Chinese companies that are enlisted in the local stock market, whereas those that go to foreign markets have a better performance (Liao 1998). This is to mean that the availability of capital to invest in China is part of its main reasons that it is attractive to foreign investors as their investments can be guaranteed to have returns. In addition, there is plenty of capital in China, but without vehicles to see that the capital is used in constructive projects, there are increased investments as the capital resources are more than the investments available. This is to mean that the country is strategically placed to receive direct investment by multinational firms that want to benefit from the funds available, as well as the resources found there. With little investments going on, there are plenty of opportunities and funds that are unexplored, creating the need for foreign investors to come in and create partnerships with the existing firms and capital holders in order to drive the economy forward, as well as have the funds released as part of a joint venture. Competitiveness Competition in China is a major contributor of the attractiveness of the Chinese business appeal in that the industries and businesses found in China thrive based on tight competition. This is so because of the dynamics of technological innovations that keep investors and businesses on their toes. As such, each investment needs to keep growing lest it is phased out due to being conservative and sticking to conventional means of handling business. The attractive aspect, therefore, lies in the competition, where different firms working in the same sector compete against each other to stay afloat, which are a healthy form of competition to keep the economy of the country running (Tung-lung & Weichun 2011, p. 153). In addition, the contribution of competition in the business environment of China for investors is brought about by foreign direct investment. This is done through new investment that uses the above strategic information to ensure that the available capital is put to good use. As such, new businesses compete against older ones as the new ones have an edge owing to technological innovations, while the older ones have an edge based on their experience. This is the perfect environment for any business that wants to grow from scratch and make a name for itself as they all need to evolve and adapt to new requirements and technologies, which makes China a dynamic economy and which is an attractive feature for multinationals seeking to establish new investments. Apart from this, there are numerous malpractices in China that act as a magnet for foreign investors and multinationals to set up their businesses. This is because there are illegal practices in China that are only practiced in that country and not anywhere else, which makes the country more competitive than the rest in the global economy. The country has an intricate web of illegal subsidies that range from land, capital and utilities to tax breaks that other countries cannot compete with. This makes the country very appealing in terms of its practices that see investors flock into the country. Competition goes again as far as innovative measures to overcome foreign competition, where there are incentives such as those that see the American market receive more goods from China than those that go into China from the United States. This is an attempt to see to it that competitors in America are removed. The practices also involve espionage, which is a malpractice found in China, and in which there is no consequence meaning that corporate espionage is used in China to develop the economy and businesses. This competitive edge is expensive for its competitors and is, in turn, appealing to foreign enterprises seeking a new market or even hub in which they can do business. This form of espionage covers foreign businesses in that products of competitors are produced and launched in China prior to their actual manufacture in their countries of origin. Competition is, therefore, part of appeal of China towards foreign investments for having means through which they can outwit traditional business practices through legal loopholes. Stability China is also attractive for inward direct investment by foreign investors following its stability as a nation with a history spanning a long time. With this in mind, China has a strong sense of responsibility to ensure that the state of the nation remains constant or improves and does not take a step backwards. This is to mean that their internal policies to ensure stability are directly related to the level of satisfaction of the people, where stability is one of the main drivers of the business world in the country (Charles et al. 2003, p. 148). As such, job security and stability are valued by employers and leaders in the country to ensure that there is no civil unrest following the country’s socialist approach that calls for the good of the many over the benefit of one. This means that the country enjoys stability in politics despite complaints of corruption and irregularities in the government. As a result, there is widespread stability in most sectors of the economy ranging from the money markets to the political systems and stock markets (Zimmerman et al. 2009, p. 2274). The stability of this country is attributed to its saving culture, which has seen the country affect the stability of the rest of the world while its own remains intact as it creates imbalances in global markets. As a result, investors find it safe to invest their capital and resources in China as it remains unaffected by global trends due to its saving glut that only pushes the country’s investments by foreign enterprises higher (Navarro 2012, p. 34). Regional and International Trade China has seen its fair share of investors flock the country due to its strategic nature of international and regional trade, where the country well suits the two forms of trade with other nations (Neidel 2010, p. 32). With this in mind, the country has repeatedly sought to position itself strategically by signing free trade agreements with other nations in order to have its products flow into trade partners’ territories at no cost. For multinationals, this is an ideal deal for them to reach far markets that they would conventionally reach if they used their home country policies and trade agreements. Instead, China offers advanced opportunities for the penetration of foreign markets through free trade agreements, and investors are able to trade freely without having to go through conventional inhibitions. It is for this reason that China is strategically positioned to market its goods and even foster relationships with the international community (Nankervis 2011, p. 100). In addition, China is an investor magnet due to its highly liberalised business policies that cater for the needs of internal interest groups, in which its regional trade agreements allow China to act as a form of investment protection. The free trade agreements are meant to liberalise the market so that investors can make the most of the available resources and provide a market for its goods, where the local market is flooded with competitive goods from other local investors (Zeng 2010, p. 636). This drives the country to be more attractive for foreign direct investment owing to its ability to stand for liberalisation and protection of its industries and investors, as well as providing a viable market for their goods. Policy In addition, the country is attractive to foreign investors due to its overwhelmingly cordial relations with other countries, where it holds a lot of bargaining power with them. This is especially so with the power it holds in relation to the stability of the government and its direct impact on the rest of the business world. With this in mind, the position of the government holds much water in that it determines how businesses are run and conducted throughout the country and with foreign investors. As a result, there is a policy in the government that covers for investors by eliminating certain tariffs and inhibitions, which makes it easy to set up enterprises throughout the country by eliminating corruption (Chandra & Chao 2011, p. 64). This is because some of the policies that act as red tape for founding businesses are usually for the purpose of corruption and have nothing to do with revenue generation. In conclusion, China is highly attractive to investors due to its availability of capital where it offers capital to its investors, as well as opportunities for investment. It also a highly competitive base for business with legal and illegal means of making and ousting competitors, as well as creating thriving enterprises, where stability offers an opportunity to make the best out of the business environment with no threats in the economy and political scene. In addition, there is the openness to regional and international trade, where the liberalised market acts as a form of protection for the investors and their enterprises. References Chandra, A & Chao, C 2011, 'Growth and evolution of high-technology business incubation in China', Human Systems Management, vol. 30, no. 1/2, pp. 55-69. Charles et al. 2003, Fault lines in China's economic terrain, Rand Corporation, California. 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