FDI Distribution In China

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It is worth noting that the FDI distribution in China has been largely lopsided and this can be attributed to the imperfect and primitive legal regime . Additionally, the main reasons have been that some investors, especially from the US and MNCs countries, are a bit laidback due to concerns about the security and stability of their investments. Moreover, the Chinese from overseas (especially those living in Hong Kong) may employ linguistic as well as cultural links to keep contractual costs and information at bay. The overseas Chinese are known to contribute smaller amount of FDI compared to the non-ethnic ones. This can be attributed to the fact that the overseas Chinese have medium to small-sized firms. The other reason for this is the…show more content…
According to figure 3, a huge chuck of the total FDI in China is dedicated to the manufacturing sector which is allocated approximately 60% of the contracted FDI in 2009. In this sector, approximately half of the FDI is allocated to the labour-intensive manufacturing process namely the furniture, food processing, and clothing and textile, the technology- intensive ( electronics, medical and pharmaceuticals, and electrical machinery) and capital-intensive manufacturing ( chemical materials and petroleum refining) share the rest of the FDI in almost equally. This shows that foreign companies main motive for was to take advantage of the low labour costs that China was offering. The next sector in line is the real estate industry which accounts for 24% in 2009. The distribution sector, which is made up of the wholesale & retail trade and catering services, come in 3rd at…show more content…
In China, cooperative joint venture companies, equity joint venture companies, wholly foreign-owned enterprises are the dominant types of FDI in China being absorbed into China. However, this has not always been the case; at the onset of the reform period, the joint ventures were the only entry FDI forms that were allowed in China, save for the SEZs. This was partly due to China’s ideology and also because China preferred it as the better suited FDI type for tapping into advanced technologies. However, in 1986 onwards, China gave the green light for wholly foreign-owned enterprises to be established in areas that were outside the Special Economic Zones. As a result other FDI forms picked up and the cooperative and equity joint ventures advanced to become the most dominant forms of FDI. That notwithstanding, recent trends show that a huge chunk of FDI is channelled into wholly foreign-owned enterprises which represented greater than 50% of the total commitment in the year 1999. However, FDI in China is not limited to the above 3

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