Role of government for FDI in China Assignment

Role of government for FDI in China Assignment Words: 523

China’s economic growth is the massive amount of FED Inflows into China . Under the influence of the paramount leader, Eden Gapping, who reformed and led to the opening of China , China recorded the second highest FED inflow In the world (Slouching & Seven, 2000). Government polices, which are the Internal drivers of FED, aided the escalation of inward FED and have propelled China Into one of the fastest growing nations today . The focus of this essay is on the pervasive role of the Chinese government in strengthening FED inflows, thus enhancing in economic growth in China.

The Special Economic Zones (SEE) policy, encompassing more flexible laws and regulations, has been implemented to cultivate a robust business environment . In view of this policy, the government abolished local protectionism, De-monopolized the Chinese firms in the market and attracted multinational companies by lowering trade barriers (Roared & Heathens, 2002). China adopted a decentralized economy and investments soared as officials could have more control over their zones by awarding incentives and Tats passes’ to certain foreign investors .

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As such, Investments are more imitatively priced as negotiation of the terms of Individually different contracts could be made . With the SEE policy, Investors are highly driven to Invest In China, hence contributing to massive FED Inflows and economic growth. To attract FED, the Chinese workforce was continuously improved, in terms of their productivity, skills, technological know-how and education level. The abolishment of the “iron rice bowl” practice, which resulted in employment flexibility (Lung, 1994) and the rise in the quality of labor, incentives more FED .

The government’s objective is to enhance China’s wage competitiveness against other emerging countries in order to attract investments that require both low cost as well as relatively skilled labor inputs. As a result, FED inflow surged due to China’s increasing competitive advantage of a high quality, low cost and large pool of human capital . In 2001, the government progressed toward a market economy and Increased Chinas trade volume Vela her participation In the World Trade Organization , which provided greater opportunities for Joint Ventures (Hung, 2003) and export-oriented businesses.

Joint Ventures offered win-win outcomes: China gained transfer of technology, but more importantly, investors benefited from lower cost of operations . China also attracted export-oriented businesses, notably from the Asia region and businesses could leverage on China’s reduced trade barriers and restrictions to export internationally. Due to close geographical proprieties and similar business cultures, Asia initially contributed a significant percentage of FED inflows compared to the West . Entering into WTFO allowed China to globalize and integrate with global economies, including the West.

Thus, China’s Industries, especially low technology manufacturing sectors, have seen exponential Increase in investments globally . However, the Chinese government has failed to address certain Issues, which may Impede FED Inflow and undermine China’s economic appeal. Firstly, there Is Increasing political and social unrest due to the different growth rates In different provinces. The sharp change In disparities and increasing inflation could dampen investors’ confidence in China , so dominant that even multinational organizations have to resort to similar methods to penetrate into the China markets .

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