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.
RESEARCH PROBLEM
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.
RESEARCH QUESTIONS
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?
METHODS
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.
REFERENCES:
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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