Assessed blog 3-Foreign Direct Investment (FDI) in China

In this world, investment and trading is very essential for its progress of globalisation in the economy activities and this has creates many foreign investment in the market. Thus, it can defined foreign direct investment is a direct investment that involves another country or firms to set up a branch, joint ventures or subsidiary in another country.

The People's Republic of China also known as China is one of the fastest developing countries in this world. The speed of economy of China developed around 8% to 11% every year. China also has the largest population. Through their huge populations, China has the cheapest labor forces and it is also considered to be one of the countries that would invite potential foreign direct investors. In the past decade, China has been the second largest foreign direct investment (FDI) recipient destination in the world, after the Unite States.Launched in 1978, China's "open door policy" constituted a unique and vast laboratory for the study of major structural changes in China and the world economy. Since then, foreign direct investment has become an important source for China's investment in fixed assets. According to the statistics of IMF, in the following chart, it shows the China`s net foreign direct investment from 1982 to 2014.

Foreign investment remains a strong element in China's remarkable expansion in world trade and also as a new emerging market. According to the statistics of labour forces in China on 2006, the labour force of China is 798 million people. With the high labour force, stiff competition has arisen and this has reduced the labour cost and eventually reduced its cost of production. In addition to this, China has paid great attention to the education of its people such as nine-year universal compulsory education. Therefore, these labourers are of relatively high quality and there are comparatively numerous technical personnel.  Thus, this has given China an advantage to welcome foreign manufacturers and investors to open its market, optimize its cost and maximize its profit. However, the huge potential of labour force is not just one reason that foreign company chooses China as their invested destination. With a population of 1.4 billion, China seems to be considered as a large potential market rather than potential labour market. For instance, the famous soft drink company, Pepsi, has considered China as a potential soft drink market, thus, Pepsi construct its first manufacturing factory in China at 1980. Since then, Pepsi has established more than 30 manufacturing plants in China by investing around 5 billion US dollars and hiring 10 thousands employees. (Xinhuanet, 2013) 

China is a developing country in its industrialization stage. With the development of the economy, the increase in population and the higher living standards, the living amount of primary energy consumed will undoubtedly increase in the future. These absolute increases will occur despite the continued technological improvements and reductions in energy intensity. Being the world's fourth largest country with the total area of 9,596,960 kilometres and second largest country in land, foreign investors has established their manufacturing in China. To further illustrate this point, China has become a key centre for hardware design and manufacturing by such companies such as Ericsson, General Electric and Hitachi Semiconductors. 

Share markets in China are also another way that of attracting FDI inflow. It has been authorized by some of the foreign banks to open branches in Shanghai, thus allowing foreign investors to purchase special "B" shares in selected companies that are listed on the Shanghai and Shenzhen Securities Exchange. These class B shares are special Renminbi-denominated ordinary shares sold to foreigners, but it does not carry ownership rights in a company and it is also traded in foreign currency. On the other hand, many China dot com companies collect their funds for their development in NASDAQ, such as SINA.COM, SOHU.COM and XINHUAT.NET. These companies are invested by individuals from all around the world, thus this can be considered a foreign direct investment.

China performance has been impressive up to know, foreign direct investment has played an important role in the Chinese economic reforms. Foreign investment in the country has reduces the problem of working capital, per capita GDP has increase, fixed asset investment has increased, these are some of the key benefits achieved through foreign direct investment. Chinese economy is confronting numerous serious problems, which needs to be address. The Chinese government need to promote domestic demand especially consumption in order to reduce china reliance on investment and export. 

In the third quarter of 2013, The BNP Paribas Cardif SA Group of France agreed to acquire a 50 percent interest in ING BOB Life Insurance Co Ltd, from ING Insurance. The ING BOB Life Insurance is an insurance agency and a 50/50 joint venture between ING Insurance International BV and The Bank of Beijing; it operates eight branches in seven provinces and municipalities in China, offering 
savings and protection products.

Governments play an important role in FDI, Chinese government has formulated and revised law and regulations and policy documents completely according to the requests of the market economy as it promised when joining WTO, and will make it just, fair and open when setting up a new law and regulation and policy. Meanwhile, combining the transformation of the government functions, China will improve the examination and approval of investment management while reduce the links, and increase the service efficiency.

While in my point of lecture review, taking the accession to the WTO as the turning point, China has ushered in a completely new phase for its opening-up and become a popular foreign investment destination,Chinese natural investment environment is the most attractive piont, which is rich in agricultural resources and mineral resources, and made China has a competitive advantage in attracting foreign investment. Meanwhile, rich resources serves better for the investment of manufacturing and service industries.