What makes china an attractive location for inward direct investment Essay

What makes china an attractive location for inward direct investment by multinational enterprises - Essay Example This project has incorporated over US $580 billion. The inward direct investment for China has grown with these developments in the economy. In 2007, foreign direct investments reached $83.5 billion. Foreign outflows increased further in 2008 and has grown steadily since. China went ahead to announce increased merger and acquisition deals to above one hundred and thirty mergers in 2008. Furthermore, merger and acquisitions in 2009 exceeded US $27billion. China’s strength in the international investment lies its ability to remain consistent through economic downturns (Qu et al 2010). Foreign outflow and inflows in China has been notably stable despite persistent downturns on the global threshold. Most studies attribute development of the Chinese economy and its financial stability to foreign investments. More than fifty per cent of Chinese exports come from foreign connections, located within the country. Moreover, three hundred out of five hundred of the world’s largest companies, have extended their productivity schemes to China. These foreign firms alone employ approximately twenty four million workers within China (Green et al 2010). The data taken shows that over three quarters of Western, Japanese and other Asian multinational organizations move to China’s domestic market (Urata et al 2006) Investors are especially attracted to China by low costs of labor and land. The Chinese labor force is among the largest in the world. It consists of over one hundred and four million in the productive sector. This number alone doubles the labor forces of Germany, US, Italy, Canada and Britain altogether. The Chinese market is also characterized by offer deficit besides the favorable costs of land and available labor. China is endowed with resources such as minerals for example, aluminum, bauxite and oil that are useful in the investment process. The nation’s investment is similarly influenced by money supply and recent account balances. Coun tries seeking to attract foreign investment use such methods as these. The methods involve creation of incentives by reduced taxation on exportation to China, critical recommendations on technology and favorable loaning processes along with good infrastructure for telecommunication and transport purposes (Paprzycki et al 2008). Chinese inward investments by and large exceed those that are made outside the country. The country has also resulted in creating provision for its international capital for own foreign investments. China’s overseas investments have been encouraged by overflow of resources and the country’s allegoric domestic demand. The country’s excessive capacity in production has led to sectors of the Chinese economy seeking international investment opportunities. This for the sake of further growth in such industries that bear an overflow. Furthermore, investments take advantage of quota free access to countries like the United States by investing di rectly through other nations such as Africa and Cambodia. Other nations have advantages such as location specificity and incentives (Wang, 2002). The United Kingdom for example provides with investment grants. Chinese foreign investments take advantage of this benefits. Investments by the Chinese firms is motivated by opportunities to gain knowledge on certain technologies. The Chinese foreign direct investment goes into other economies with the aim of obtaining technological knowhow. The technological knowledge later applies in China’s own production processes (Zheng, 2008). The Chinese government reinforces foreign investmen