Analysing factors effecting Foreign Direct Investment in China - Essay Example

Southeast China in particular has become a hotbed of business activity. Presently, China is actively encouraging trade with the West, and it is a major trading partner of the United States. Despite this progress, many U.S. and European multinationals find that doing business in the PRC can be a long, gruelling process that often results in failure. One primary reason is that Western-based MNCs do not understand the role and impact of Chinese culture. The country launched its open door policy 26 years ago.

Since the policy introduction the FDI flows in the country received a quick response. In 2004 China was at no.2nd position in the world of FDI with $64 billion. The Chinese FDI trends can be examined in two phases. In the third phase Deny Xiaoping opened China for overall economic reform. The phase was very fruitful for China. The government introduced new policies and market oriented economic reform. In result of these reforms the FDI's started flowing into the Chinese economy at rocket speed.

In November 1999 US-China had an agreement regarding the WTO, according to which many new reforms were made (Sandra, 2001) those included In the first six months of 2002, act. One primary reason is that Western-based MNCs do not understand the role and impact of Chinese culture.Since the last few decades there has been a multifold increase in the FDI in China. The Chinese economy has now gaining the power of effecting the decisions of the economic bodies of the world. History of FDI growth in China:The country launched its open door policy 26 years ago.

Since the policy introduction the FDI flows in the country received a quick response. In 2004 China was at no.2nd position in the world of FDI with $64 billion. The Chinese FDI trends can be examined in two phases. First phase: 1979-82Second phase: 1984-91Third phase: 1992-99In the first phase the government establish for special zones with incentive policies. Although there was a high inflow into those regions, the total FDI flow reached US $ 1.8 billion.In the second phase the provinces were opened and recorded US $ 10.3 billion. In 1989 however the trend dropped.

In the third phase Deny Xiaoping opened China for overall economic reform. The phase was very fruitful for China. The government introduced new policies and market oriented economic reform. In result of these reforms the FDI's started flowing into the Chinese economy at rocket speed. In November 1999 US-China had an agreement regarding the WTO, according to which many new reforms were made (Sandra, 2001) those included The sectors relating to the distribution services will be opened for repair and maintenance and China will phase in trading rights and distribution services over three years.

The Government for the investment opened the telecommunication industry of China.The professionals were also allowed access to the service markets of China. The services included according, consulting, Information