July 13, 2008




On the global scene, China's increased self-confidence is presenting challenges (Datamonitor, 2004). The two reasons why China is attractive to multi-nationals are: substantial size and high growth rate of its consumer market (Cui and Liu, 2001). In addition, at the macro-economic level, China's GDP reached $954 billion in 1998, making the sixth largest economy in the world. The retail market of China grew from $200 billion in 1996 to $351 billion in 1998 and increasing until now (Cui and Liu, 2001). However, the problem is the difficult entry of FDI in China. In the particular case that will be explored in this company, a particular European country cannot engage into investment into the country although it already has a branch there. China's policy of FDI is definitely strict and certain strategies should be conducted for company branch to engage into direct investment. The main aim of this study is to be able to devise a strategy that will be able to make the company engage into investment in China without violating any legal rules. The main strategies being proposed are: secularization; Non-performing loans; and lease.


Foreign direct investment (FDI) is an extensive cross-border investment between a direct investor (either an individual or business entity) from a stronger economy and a direct investment enterprise in another country conducted by the previous not for exploratory or provisional purposes only, but to instead acquire a long-term relationship with the latter in order to serve its domestic markets, make the most of its resources, or create a stage that will serve world markets through exports (Capital Markets Consultative Group [CMCG] Working Group, 2003; Jensen, 2003; United Nations, 2003).

China has been the second largest recipient of foreign direct investment (FDI) in the world after the United States for the past seven years (Countrywatch, 2005). Chinese statistics reported that by the end of 1999, realized FDI in China since 1979 reached a cumulative total of just over $308 billion. The flow of new FDI into China dropped 11 percent in 1999; the first time Chinese statistics recorded a decline since China's opening and reform began in 1979. The value of new contractual investment, a harbinger of future investments, dropped even faster, by 21 percent China's economic slowdown, uncertainties over how WTO accession would affect the investment climate, and the effects of the Asian Financial Crisis on China's traditional investors contributed to the decline (Countrywatch, 2005).

However, China has developed and expanded a complex system of investment incentives over the last twenty years. The Special Economic Zones of Shenzhen, Shantou, Zhuhai, Xiamen and Hainan, 14 coastal cities, dozens of development zones and designated inland cities all promote investment with unique packages of investment and tax incentives. Chinese authorities have also established a number of free ports and bonded zones. In 1999, China announced that it would offer special investment incentives to attract foreign investors to its highly underdeveloped central and western regions. However, there are still legal barriers to investment especially those companies who have branches in China. Such companies are being prevented from investing on another company for some reason.


          The following research questions will be explored in the study:

Ø      What is secularization and how can it be used by the company to access investment in China?

Ø      What is non-performing loans and how can it be used as a strategy?

Ø      How can leasing be used by the company to get some investment?


The research will utilize descriptive research. A descriptive research intends to present facts concerning the nature and status of a situation, as it exists at the time of the study (Creswell, 1994). It is also concerned with relationships and practices that exist, beliefs and processes that are ongoing, effects that are being felt, or trends that are developing. (Best, 1970) In addition, such approach tries to describe present conditions, events or systems based on the impressions or reactions of the respondents of the research (Creswell, 1994). The study will conduct an in-depth literature review about the three strategies and will present descriptively the major advantages and disadvantages of the three.


Best, J. W. (1970). Research in Education, 2nd Ed. Englewood Cliffs, N.J.: Prentice Hall, Inc.

Capital Markets Consultative Group (CMCG) Working Group. (2003). Foreign Direct Investment in Emerging Market Countries. Washington, DC: International Monetary Fund (IMF).

Country Watch. (2005). China: 2005 Country Review. In CountryWatch.com [online]. Available at: [http://www.countrywatch.com]. Accessed: [07/15/2007].

Creswell, J.W. (1994). Research design. Qualitative and quantitative approaches. Thousand Oaks, California: Sage.


Cui, G. and Liu, Q. (2000). Regional market segments of China: opportunities and barriers in a big emerging market. In Journal of Consumer Marketing, Vol.17, No.1, pp.52-72.

Jensen, N.M. (2003). Democratic Governance and Multinational Corporations: Political Regimes and Inflows of Foreign Direct Investment. In International Organization, Vol. 57 (Summer), pp. 587-616.

Datamonitor. (2004). China Country Profile. London: Datamonitor plc. Available at: [www.datamonitor.com]. Accessed: [21/01/2005].

United Nations. (2003). World Investment Report 2003—FDI Policies for Development: National and International Perspectives. Switzerland: United Nations Publications.



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