A Journal opinion article - Essay Example

Increasing foreign investments into the United s The United s has been perceived as the most favorable nation for foreign investment. China had been the global leader but trend changes in the year 2001 and favorable political, economical, and social factors that currently prevail in the United States could be the reason. In addition, the worsening economic state of china could also be considered as a contributing factor for America’s emergence as the top investors’ destination. The undergoing financial recovery spear headed by the Obama’s administration could have motivated most of the confidence in United States by foreign investors.

More than 63 percent of the respondents of a study by Kearney expected economic growth in the United States. Companies that had relocated from the United States are setting up camps again in the country. According to a Wall Street Journal article, Toyota Motors announced its plan to expand its plants in the country by investing over $200 million in its Alabama, Missouri, and Tennessee plants. On the other hand, some scholars argue that government policies such as the economic stimulus program, which saved banking institutions and motor companies during recession, impressed foreign investors hence luring them to come and invest in the country.

Increased level of security in the country could also be a factor. Since the killing of Osama bin laden, there has been minimal terrorist attack in America or targeting its citizens. The capture of the leader of al Qaeda seemed to have reassured foreign investors’ minimum risks because of peaceful and stable market (Bases and Badawy 1; Hagerty 1). Foreign investors’ confidence in the United States could have motivated by increased exploration of petroleum in the nation because the rise in production of oil and gas translates to far reaching positive consequences for the United States economy.

First, rise in oil production will facilitate drop in the cost of energy. Mian explains that with lower energy prices, industrial companies, and major players in the industrial sector are set to take advantage of the situation and invest further in the sector (78). Consequently, foreign investors stand to enjoy the same incentives being offered by the market because of lower oil and gas prices such as reduced cost in energy. Emergence of United States as the most preferred destination by foreign investors could have also been triggered by the poor performance displayed by china in the last year.

In his article in the wall street journal, James R. argued that China suffers from a rapidly aging population and investors are afraid of the declining cheap labor in the Chinese economy. A survey conducted by Starr indicates that majority of the population are either retirees or those who are too old to work (pg 101). This has led to increase in the labor costs, which in turn has the effect of driving investors away. Faced with such challenges investors prefer cheap labor, which is readily available in developing countries such as Brazil and Mexico.

In addition, the Chinese economy also witnessed a decline in its economic growth rate, which fell short to reach the double digit. The situation was further worsening by the appreciation of the states currency, a scenario that made their economy too expensive for investors try their luck. United States market has taken advantage of the Euro zone crisis, having just recovered from an economic crisis. Most of the European countries still from the euro zone crisis and the ongoing recession, from which United States has just recovered.

Germany and England economies that are relatively stable are too pre occupied with saving the euro zone and bailing out countries such as Greece. Foreign investors are not willing to risk with such states characterized with economical uncertainties. The existence of decreased economic growth in China and the Euro zone crisis in the Europe therefore leaves United States and the emerging developing countries as the prospective foreign investments destinations. United States enjoys positive economical conditions and government policies prevailing in the country at the present.

The current administration have stream lined the housing market set up guiding policies for both domestic and foreign investment. The government has further facilitated the increased exploration of oil and gas within the United States minimizing importation cost. However, there exist also others scenarios outside the country which prompted investors to consider United States for investing. Recent decrease in the Chinese economic growth rate, continuous rising labor cost, and aging population are some of the contributing factors to China’s decline in investors’ confidence hence favoring United States.

Finally, the current crisis of euro zone has discouraged investors from risking with the European markets coupled with claims of other countries withdrawing their membership. Works cited Hagerty, James. “U.S. overtakes China: Nation ranks first in survey on foreign-investment climate.” The Wall Street Journal. June 26, 2013. Web. June 27, 2013. < http://online.wsj.com/article/SB10001424127887323998604578567740008896614.html?mod=WSJ_article_CareersHeadlines >. Mian, A. Project Economics and Decision Analysis, Volume 1: Determinisitic Models.

Tulsa, OK  PennWell Corp.2011 Print. Starr, John. Understanding China: A Guide to China's Economy, History, and Political Culture. New York, NY:Hill and Wan Publishers, 2010 Print. Bases, Daniel, and Badawy, Manuela. “U.S. tops confidence survey on foreign investment, displaces china.” Reuters. June 26, 2013. Web. June 27, 2013. < http://www.reuters.com/article/2013/06/26/us-fdi-survey-idUSBRE95P05X20130626 >.