StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Why Chinese governments stimulate outward FDI - Essay Example

Cite this document
Summary
According to the report by Randall Morck, Bernard Yeung and Minyuan Zhao (2007), the growth of outward investment (FDI), from developing and transition economies has greatly increased. China is one of the countries that are practicing the outward foreign investment. This means…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER94.5% of users find it useful
Why Chinese governments stimulate outward FDI
Read Text Preview

Extract of sample "Why Chinese governments stimulate outward FDI"

Why Chinese governments stimulate outward FDI Why Chinese governments stimulate outward FDI? According to the report byRandall Morck, Bernard Yeung and Minyuan Zhao (2007), the growth of outward investment (FDI), from developing and transition economies has greatly increased. China is one of the countries that are practicing the outward foreign investment. This means that china is injecting funds into and enterprise that in a different country the text discusses on the main targets of the FDI and the interest of the chine managers.

The Chinese managers see FDI as a way of upgrading technology and augment earnings (Morck, et al. 2007). With the outward FDI, china will grow sustainably as well as different players will gain prominence.China has continued to stimulate outward FDI, with the lifting of restrictions on Chinese firm operations overseas on the new law on foreign exchange. For instance, there is no need to obtain exchange based on a risk assessment. This is expected to increase Chinas Outward FDI. As much as the countries may have difficulties in navigating towards the process, China may opt to go to the developing countries because of initiatives employed by these countries.

Recently China is focusing on Africa, to increase the outward FDI since it is currently relatively small than the size of its economy (Ilhéu, 2010). There are other top host countries of great interest to china, which include Hong Kong and the Caribbean tax haven. That constantly account for about 70% of the flow. These counties are often used by multinational firms to store wealth as a result of their confidentiality to the foreign investors. Focusing on these countries by Chinese firm may also be one of the ways of hiding wealth from tax authorities, other authorities or the public shareholders (Morck, et al. 2007).The following are the three features of Chinese macro environment that are likely to connect with the outward FDI surge.

High saving rates, Weak corporate governance, distorted capital allocation. As much as outward FDI can let firms gain important economies of scale and scope, the above features could combine to induce excessive outward FDI by the wrong players that would be working with the Chinese long-term economic prospects (Morck, et al. 2007, p 10). Therefore, it is important to understand outward FDI to achieve prosperity.Outward foreign direct investment by the Chinese firms was expected to reach a record of USD 120 billion in 2014.

However, the recent liberalization of capital controls has also further complicated the task of recording such outflows accurately. Other data points suggest that the growth of China outward investment was much lower in 2014 than it was speculated in the official data suggested.However, outward FDI in china has continued to grow from zero in seventies and eighties to USD 16 billion in 2006. Official data from the Chinas Ministry of Commerce (MOFCOM), shows that the outward FDI by the Chinese firm is on track and the projection of 2014 were USD 2014, as a result of reforms that significantly cut approval requirement for investors.

However, the MOFCOM data largely ignore the reverse flow, which involve the overseas subsidiaries back to Chinese parent firms. It has greatly jumped over the last past two years as a result of free movement of money both ways and a tighter credit situation in China. In the coming years Chinas, outward FDI is expected to grow significantly not only in volume but also in a variety across industries and organizations. Proper understanding of outward FDI is a platform for the introduction of market reforms that improve on domestic investment and enhance growth.

ReferencesBerning, S. and Holtbrügge, D. 2012. Chinese outward foreign direct investment—a challenge for traditional internationalization theories?. J Betriebswirtsch, 62(3-4), pp.169-224. Collins, D. 2013. The BRIC states and outward foreign direct investment. Oxford: Oxford University PressIlhéu, F. 2010. Chinese Outward Foreign Direct Investment. International Journal of Asian Business and Information Management, 1(4), pp.43-56.Morck, R., Yeung, B. and Zhao, M. 2007. Perspectives on Chinas Outward Foreign Direct Investment.pp. 3-29.Robins, F. 2013.

The uniqueness of Chinese outward foreign direct investment. Asian Bus Manage, 12(5), pp.525-537.

Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Why Chinese governments stimulate outward FDI Essay”, n.d.)
Retrieved from https://studentshare.org/macro-microeconomics/1683204-why-chinese-governments-stimulate-outward-fdi
(Why Chinese Governments Stimulate Outward FDI Essay)
https://studentshare.org/macro-microeconomics/1683204-why-chinese-governments-stimulate-outward-fdi.
“Why Chinese Governments Stimulate Outward FDI Essay”, n.d. https://studentshare.org/macro-microeconomics/1683204-why-chinese-governments-stimulate-outward-fdi.
  • Cited: 0 times

CHECK THESE SAMPLES OF Why Chinese governments stimulate outward FDI

An Empirical Study on FDI

An empirical study on fdi, inward or outward Table of Contents Introduction 3 fdi Performance of Saudi Arabia 4 Comparison of Saudi Arabia's fdi Profile 6 Factors influencing fdi Flows in Saudi Arabia 7 Government Policies controlling fdi Flows 9 Evaluation of the Present Scenario 9 Conclusion 11 References 11 Bibliography 12 Introduction Foreign Direct Investment plays a very significant role behind the growth and economic performance of a nation....
10 Pages (2500 words) Essay

Overview of Mexico Inward and Outward FDI

Date Part A Overview of Mexico inward and outward fdi Mexico is a highly populated Latin American nation.... This was the second highest fdi in the country's history.... About half of the fdi investment to Mexico was from the USA.... fdi inflow within September 2007 for Mexico amounted to $18.... Half of the capital investment in the form of fdi was directed towards the manufacturing sector.... The fdi and ODI rankings of Mexico in the world are moderated but continue to grow (see below)....
6 Pages (1500 words) Essay

HOW HAS CHINA'S OUTWARD FDI DEVELOPED AND WHAT BUSINESS STATEGIES DOES IT SERVE

HOW HAS CHINA'S outward fdi DEVELOPED AND WHAT BUSINESS STATEGIES DOES IT SERVE?... by Author's Name Name of the Class Name of the Professor Name of the School City, State 13 May 2013 The Development of China's outward fdi Prior to 1979, China's Foreign Direct Investment (FDI) and foreign loans were notably small.... Since the establishment of this law, China has developed from a country with small reference for outward fdi, to an influential emerging nation....
3 Pages (750 words) Essay

Theories of FDI

According to US, fdi is the "ownership or control of 10 percent or more of an enterprise's voting securities, or the equivalent interest in an unincorporated business" (Pustay & Griffin, 2006) According to US, fdi is the "ownership or control of 10 percent or more of an enterprise's voting securities, or the equivalent interest in an unincorporated business" (Pustay & Griffin, 2006) Foreign Direct Investment can either be inwards or outwards.... ohn Dunning, professor at the University of Reading (UK) and Rutgers University (US) provided the Eclectic theory of fdi which is also known as OLI paradigm....
5 Pages (1250 words) Essay

The Nature of Foreign Direct Investments

hellip; The aim of this paper is to discuss the nature of Foreign Direct Investment (fdi)) and the issues related to this subject with the goal of determining its importance in the subject of globalization. Foreign Direct Investment (fdi) broadly refers to different forms of investment with two commonalities: a) the investment is earning interest and b) it is invested outside the domestic operations of the investor.... fdi denotes a degree of direct ownership whereas indirect investments are those gaining exposure to enterprises without investing directly such as listed securities, investment funds and derivatives....
8 Pages (2000 words) Essay

Chinese Government and Media

Many international journalists and reporters have accused the chinese government of using state owned media as a too for spreading propaganda.... They assert that the chinese government deliberately hides information from its natives or it twists information in order to potray them in a positive light.... This was a move that solicited negative remarks form a large number of chinese more so in the Diaspora.... According to this report, chinese living in Canberra voiced their complaints against Taiwan's attempt to make themselves independent of the rest of China....
11 Pages (2750 words) Essay

Government Policies

The most common policy that governments' employ to stimulate long-term growth is through its fiscal policy.... Fiscal policy meant using governments' power of expenditure and taxation to stimulate growth in the economy.... Which current government policies do you think are likely to stimulate long-term growth?... The most common policy that governments' employ to stimulate long-term growth is through its fiscal policy.... Fiscal policy meant using governments' power of expenditure and taxation to stimulate growth in the economy....
1 Pages (250 words) Essay

The Chinese Government Hand the Economic Reforms in China

Explain the three policies or measures the chinese Government has adopted to drive forward the economic reforms in China, according to Doug Guthrie's China and Globalization, Chapter 4, China in the Global Economy, pp.... 109-168. China underwent several reforms economically due to which, it gained the status of ever-growing Doug Guthrie informs that chinese government has taken three key measures to drive forward the economic reforms in China.... The chinese government introduced both external and internal economic policies....
6 Pages (1500 words) Research Paper
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us