Chinas Outward FDI in Latin America - Research Paper Example

It also covers the history, characteristics, and statistical data of the outflow and inward flow of China’s FDI in the tax havens. FDI theories were used to identify the type of OFDI in CBVI, and the best-applied theory seems to be the value added round-tripping. The study also examines China’s legislation of 2008, which says that the Chinese companies established in the CBVI will be considered for tax purposes and will be charged 25% of their total global income; this might affect the future OFDI flows.

The unusual quality of China's FDI is also discussed as it fails to drop even at the time of recession and will continue to grow stronger with time. The paper is concluded with the writer’s observation. In 2010, China started increasing its investment in foreign countries, particularly in Europe where the increase was recorded to be as high as 102 %, and in the United States, it was approximately 74%. Almost 15% of Chinese companies have chosen Europe for investment rather than choosing the emerging developing economies from Asia(Godement 1-3).

The most interesting and worrying fact of Chinese foreign investment is that the first choice among many of the foreign destinations happens to be the British Virgin Islands and the Cayman Islands; these two are known as the tax haven of Latin America (Lina 1-5).China’s investment in Cayman islands is nearly 14 % while 6% goes to the British Virgin Islands out of its total OFDI (China Daily, 2009). The Chinese FDI outflow to the British Virgin Islands and the Cayman Islands substantial, that it prompts a question of why their offshore regions are the most popular destination for China’s OFDI.