Commodities, Mining, FDI, and the Awakening Chinese Dragon - Essay Example

with the open-door trade policy of China, the country has become the preferred country of foreign investors and as such, the recipient of numerous foreign direct investments (FDI) (Yao 2006). From 2000- 2011, China received the largest FDI inflows compared with other developing or transition economies (Davies 2012). In 2011 alone, China’s FDI inflows reached US$124 billion compared with other countries such as Brazil with US$ 67 billion, Russia with US$ 53 billion, Singapore with US$ 64 billion, and India with US$32 billion (http://stats.unctad.org/fdi/). This shows the continued confidence of investors in China. China’s good performance in the 1997-1998 Asian crises and the recent global economic slump affirms the view that China’s economy is resilient and China offers a reliable risk-avoidance haven that is suitable for international investors (Davies 2012) as the country continuously moves towards becoming the world’s largest economy (Davies 2012).

In this regard, the research will look into the impact of FDI in China with a specific focus on the mining industry. This is important, as China is responsible for the net growth in world demands since 1995 (Evans –Pritchard 2012). In fact, just recently, China’s growth contributed to the appreciation of copper in the market (Rowley and White 2012). However, Rio Tanto has announced cost-cutting measures in operating costs across the business amounting to $ 5 billion by 2014, while BHP Billiton is diversifying its portfolio (Rowley and White 2012). In addition, there is apprehension across the mining industry since China is shifting to a “modern, sleek, consumer and service drove economy” (Evans-Pritchard 2012, ¶ 9). The slowdown in China’s economy and macro-volatility of the global market feed the apprehensions in the mining industry

On the other hand, Vivoda (2011) argues China's mining industry continues to lag behind other industries in terms of foreign investments. In fact, the government consistently reforms and rectifies foreign trade policies to attract investors in the mining sector of the country; nonetheless, foreign investors steer away from China because of uncertainty and lack of transparency within the mining industry (Suxun and Chenjunnan 2008). In the face of this dichotomy in position pertinent to China’s mining industry and FDI, the research may help in clearing some concepts that conflate the trepidation concerning China’s economic slowdown.

In addition, some limitations are observed in terms of focus on existing literature that deals with the issue (Vivoda 2011). Most literature tackles specific country/ regional concerns or undertakes comparative studies (Vivoda 2011). In this regard, the study contributes to the existing literature, as it will try to explore the developments within China’s mining industry vis-a-vis FDI and understand the impact of the industry on the country as China moves toward becoming the world’s largest economy (Davies 2012).

The paper will be divided into six sections. The first part is the introduction wherein the background of the research, the focus of the study and its significance, and the structure of the paper are presented. This serves as a guide as to what may be expected from the entire study.