International Production in China - Essay Example

de global investment climate such as the ease with which international capital or direct investment flows can move, the opportunity cost factor, exchange rates, balance of payments related government policies and the global security environment. International investment or production in China has been a major global economic phenomenon during the last two decades and its impact on China’s economy has had a series of ripple effects on the rest of the world too. Globalization has come into spotlight due to many economic reasons but nevertheless the most important reason is the Foreign Direct Investment (FDI) flows into and out of a country.

China has been favored by investors as the most attractive destination for foreign investment for more than a decade now (Eichengreen and Tong, 2007). Foreign investment in manufacturing is basically the most attractive proposition and is seen in such industries as computer hardware, automobiles, automobile spares, consumer electronics, clothing, heavy engineering related equipment & machinery, DIY tools, power generators, food processing, agribusiness, biotechnology and so on. In 2004 the net FDI flows into China amounted to $153 billion.

On the other hand India which came second did not even attract half of China’s total FDI. Such international production inflows into the country are attributed to many social, economic, political and cultural factors. Among them economic factors occupy a very significant palace due to the fact that despite its political philosophy the country has been able to put in place a series of economic measures and reforms that went a long way at the beginning to give out a positive signal to potential international investors.

Such far reaching investor-friendly measures as 100% tax holidays, total protection to investment, repatriation of profits, relaxed rules and regulations, far more liberal environmental laws, less supply chain constraints and a relatively well efficient labor force, have been