Week 6: Foreign direct Investment in China

Foreign Direct Investment in China

Foreign direct investment is the process of investment outside of the origin country of the business. In other words, Foreign Direct Investment is the process of investment that dealing with the long-term correlation interest and with the purpose of an effective voice in the management in the enterprise. Foreign Direct investment has developed intensely as the main method of the international capital transfer. In addition, when the company investing for the production facilities in the other country rather than the origin country of the business itself, it can be called as the foreign direct investment. 

Some companies choose to go international in order to increase their brand image in the market or to reduce their production cost expense, seeking for the best quality of product with a cheap labor cost. However. The process from the foreign direct investment the company should take the control of what they had invested in the new location.

China is the country, which had the largest population in the world and also knows as one of the cheap labor cost in the world. China takes this opportunity by simplifying their country’s producer for the foreign investor; in sequence to attract more investor comes to their country and their economic will automatically growing.

On February 2013, the foreign direct investment in China was recorded increased 6.32 percent compared to the previous year. The government of China expected steady growth in foreign direct investment in the next following months. The increasing foreign direct investment in china is being supported by the investment from the European Union country with the amount of $2.05 billion; Japan is also one of the sources from the foreign direct investment in China with the amount of $2.29 billion, and the corporate investors from United States of America recorded invested $3.60 billion in China.

Pepsi, Wynn resorts, Apple corporation, Ford motor, Nike, HJ Heinz, GAP, these are the example of the big companies from United States of America that invested in China. In the case of Pepsi, this company has committed to $1billion for the next four years to build 14 new beverages products plan and it will doubled the production capacity in China. Besides Pepsi, Wynn resort will create tough competition with their competitors Las Vegas sands in Macau by opening their second casino this year. Last but not least, Ford motor is improved their production capacity for expanding their company to China. Ford motor is joint venture with Chang’an Ford Mazda Automobile and planning to manufacture the new generation of Ford Focus and they spare $490 million for this project. To conclude, I think it can be a good opportunities for the foreign company to make an investment in China due to the rapid economic growth in that country.