Foreign Direct Investment In China

5. What action can China take to ensure that it continues to attract inward foreign direct investment? What challenges do you see for China as it courts new investment? Few academicians and researchers have defined that foreign direct investment is an investment by foreign corporation in any country. A common example of foreign direct investment is when a foreign company comes into a country to invest directly to build or buy a factory. (Jun & Sight, 1996)

First, China has immense development in relevant infrastructure to attract inward foreign direct investment. It is the fact that the availability of physical infrastructure great influences the decision of investment especially in a foreign land. Company will have more advantage to invest

The availability of different of resources such as land, labour and the natural resources is always the key to attract more investors. One of the advantages that company will get when they invest in China is availability if all kinds of resources. The most important one is the human resources. China is the largest country in the world in terms of population and so it own rich source of labour in the globe. Besides that companies also get the lower cost of labour force and very rich in energy resources. China has oil reserve and is the largest producer of coal in the world. China’s electric power supply is sufficient with coal. Other major natural resources like examples land, iron and other materials are economically available. (Head & Ries,

Growing regional inequality in growth and income between the coastal and inland areas have influence the economic and policy issues in China. There are 2 reasons of foreign direct investment having limit spillovers to the inland city In China. Firstly, foreign direct investment and exports may have limited forward and backward relationships because the important proportion of export and foreign direct investment activities are only concentrate in the export processing zones which have little onnections to domestic company. Secondly, foreign direct investment and exports only work as engines of growth for the coastal regions but not for the inland area. China’s foreign direct investment policy has caused to the growing income completely different between coastal and inland city by focusing on specific regions. The Chinese authorities not only are giving the rights to reducing difference regional income by developing the western and central regions of the country, but also including by attracting foreign direct investment to these regions through increase investment in