China Country Analysis: Foreign Direct Investment Opportunities Report

This report provides a comprehensive country analysis of China, assessing its potential for foreign direct investment (FDI). It begins with an executive summary and an introduction, followed by an overview of China's economic and political landscape, including political, economic, socio-cultural, and technological factors. The report then delves into national resources, factor endowments, foreign currency and exchange influences, and existing trade policies, systems, barriers, and incentives. It also examines the existing levels of FDI in China, considering the impact of the US-China trade war, technological theft issues, and the one-child policy. The report concludes with recommendations based on the assessment, offering insights into the opportunities and challenges for companies looking to expand their business in China. This analysis is crucial for understanding the dynamics of the Chinese market and making informed investment decisions.

Country Analysis

EXECUTIVE SUMMARY
Company analysis is a simple process that is actually carried out by an investor in order
to evaluate the securities and profit in order to expand the business for the company. Report also
based upon the analysis of China and helps to assessing the new emerging market where the
country growth will be raised for creating the attractive investment opportunities. Report covers
some opportunities which a country have a potential for foreign direct investment.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................2
Overview of the country.........................................................................................................2
Political, economical and socio- culture or technological factors, benefits of the country....2
National resource and factor endowment for creating competitive advantage......................3
Foreign currency and exchange influence..............................................................................4
Existing trade policies, system barriers and incentives..........................................................5
Existing Levels Of Foreign Direct Investment.......................................................................5
Summary and the Recommendations Based On The Assessment.........................................6
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7
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INTRODUCTION
Country analysis is an essential key aspect that is used to determine the company's
expansion is worth or not (Fan, Lin and Tang, 2018). Chosen country for this report is China and
this report will analysis the potential as well as opportunities for foreign direct investment.
Report presents the overview of the country and describe the macro environmental factors with
benefit. Further it shows the national resources and factor endowment that can creates
competitive advantages. Report also explain trade policies, system, barriers, level of FDI and
provide recommendation for future improvements.
Overview of the country
China has been taken gradual approach into consideration in terms of liberalisation
process. This country experimented with opening of foreign investment in the selected cities
when market institutions was not fully in place (Patra, 2018). China has also made basic
commitment to services liberalisation in its accession to WTO. This driven China to manufacture
foreign direct investment that increased 81%. it has been remained quite always open in terms of
FDI in all companies of manufacturing and industries that is related to services. It has also been
decentralised approval of FDI and also implementation of policy in highly manner which leads in
creating opportunities for healthy competition in terms of Foreign Direct Investment among local
authorities. This also lead them in becoming a cause that leads to corruption.
In addition to this, attracting FDI is upcoming challenge for China. As they are striving is
order to rebalance their economy. Thus, China is also trying to improve environment and move
up the value chain. There is huge decline into China in terms of Foreign Direct Investments of
more than 1 percent year on year to USD 115.54 billion. The expected value of foreign direct
Investment in China is to be 1300.00 USD HML by last of this quarter.
Political, economical and socio- culture or technological factors, benefits of the country
 Political factors- political factors is basically related to the laws, regulatory and
government policy that influence economic factors and decisions of Government. The
economic is growing extremely after economic reform (Li, 2018). Due to this reform it
has been motivated development in terms of private business, foreign trade liberalisation,
FDI and many more. It has been analysed with a particular data statement that urban
employment of china has been reached to more than 4%. Thus, in terms of protection
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related to customer rights, there is vast increase in the customer awareness and also in
protection of their rights.
 Economic factors- china has been remained as primary recipient of destination of Worlds
of FDI in recent years. Thus, FDI is been accounted for 27 % of value added production.
There is huge growth in economic of China in recent years. Thus, labour input has been
decreased in many industries due to improvement in labour productivity and also
migration of labours from rural to urban areas.
 Socio-cultural factors- the distribution of income is also unequal in this country. As
lifestyle is changing rapidly in the whole world, people usually choose option of working
at home. It is the convenient option for those people who want to maintain smooth
balance between personal and professional life (Salike, 2016). Therefore, china choose
the option of migrating such employees far away from their home. This lead in lack of
responsibility of family and lack of homesick.
 Technological factors- the demand growth of energy in China has slowed down these
years and consumed less energy than US. High rate of development in terms of
technology plays important role in order to the economic growth of China. Nowadays
internet and technology is moving forward that helps in driving success of the economic
growth in China. The trade barriers has also been decreased that leads in producing more
job opportunities in information technology field.
Advantages
 All this helps in taking advantage of opportunities in appropriate way and also leads in
minimising maximum number of threats that may affect the cited country China.
 If correct strategic planning is made China, then they may offer a company that are
willing to expand their business in China with stable and solid environment that may help
them in growing in the future.
National resource and factor endowment for creating competitive advantage
The term factor endowment is defined or referred as amount of land, capital and labour
and also entrepreneurship that is possessed by a particular country and can be exploited for
manufacturing process (Wang, 2018). Factor endowments affects the cost of opportunity of
specialising in order to produce certain goods that is relative to others. Competitive advantage
mainly exists when cost of opportunity in terms of specialisation is lower as compared to any
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other nations. Its existence is basically affected by abundance, productivity, and also due to
labour cost. It is also due to land and capital. In addition to this, highly developed financial
system or economies of scale also affects its existence.
Factor endowments in respect with land would be presence of natural resources as soil.
Thus, the labour force of China has been grown with labours having extreme skills and talents
(Yin and et.al., 2018). This lead China in becoming specialised in producing more complex
goods or products.
Foreign currency and exchange influence
China and America are engaged in trade war. America filed a request to World Trade
Organisation in respect to concern that china was violating intellectual property rights. China and
America is on dispute in trade. It is the big problem for America that china made the copy
product of everything and it damages the image of other company. China and the US have begun
upon a full-scale trade war as both sides lob threats of new trade tariffs. On Tuesday July 10,
President Donald Trump's administration released a list of proposed tariffs on $200bn worth of
goods, ranging from auto parts to food ingredients to construction material.
Population aging is actually a very normal and natural process related with economic,
social, technological and environmental development. China is on 1st rank in worlds the highest
population.
One child policy- It makes impacted on trade of china. According to this policy the
people living in china, have to foll low on rule that every couple can be born only one child. This
policy makes a bad impact on the country because through this the old people population are
increased and new decrease in number of youngster. So the new ideas and innovations are
decreases and the country has impacted through this.
Technological theft issue- Sometimes, American manufacturers sell the machines to the
China and China make copy of that products. The Chinese copy the new machine they buy.
Microsoft for many years complained of the piracy of their intellectual property in China. China
through multiple barriers disallow trade good liability suits against Chinese business.
It is the big issue which impact on the economy of China. The other companies get afraid
of to do the business in China just because of the copied product because it damages the
reputation of the company. Through this no one like to do business in china and it makes impact
on the globally presentation of the country.
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Foreign exchange rate refers the rate in which currency of the one country converted into
other countries' currency. Foreign exchange rate is one of the important aspect in economy.
Foreign exchange rate provide stability to economy. If anyone wants to send the money from one
country to another country then is has to seen over exchange value. It is affected by many
reasons-
Interest rate- If interest rate changes then it makes impact on the currency rates. If
interest rate is higher than it provide higher rates to lenders and it attracting more foreign capital,
which is the cause of rise in exchange rate(González-Val and Marcén, 2017).
Inflation rate- Market inflation causes increase in currency rates. When inflation rate is
low then price of goods and services increase with slow rate. A country with lower inflation rate
make its currency higher and higher inflation rate make currency rate lower. So inflation rate
make impact on the exchange rate of the country.
Balance of payment- Current account balance of a country reflects earning on foreign
investment and balance of trade. It considers transaction like import, export and debenture.
Balance of payment make impact on the exchange rate of the country because if current balance
of the country is much good then exchange rate is being normal.
Political stability and performance- Economic condition and political performance of
the country shows its strength. A country like china which is more attracting to the other
countries for investment because there is low risk to invest in China. China is the most powerful
country with good GDP rate(Blau, 2017).
Terms of trade- It is related to current account balance of the country and also called
balance of payment. It is the ratio to measure export rate and import rates. If export price is high
then it generates revenue for the country and it attracts the other countries to invest and increase
the currency rates.
Existing trade policies, system barriers and incentives
China is the largest exporter country in the world. It has been recording trade surplus.
China is considering in develop countries. Maximize in the export is its largest strength which
through the economy of the country is sustainable(De Beckker and et.al., 2017). In export of
china the major products are electromechanical and labour intensive products. Barriers in trade
are following-
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Labelling marking requirement- It considers food safety law in which the labelling of
the product should have to consider following content name of product, expiry date, ingredients,
producer name address, production licensing number etc.
Import tariff- Its import tariff rate divided into parts and they are general rate, quota
rate, tariff rate, provisional rates. China is the member of world trade organisation and through it
many of barriers faced by them in trade.
Prohibited and restricted import- The following items are prohibited in import and
they are arms, ammunition, magnetic media, films and photograph which are related to the
politics of the country. Negotiable securities are also restricted in import so china has to face this
kind of issues.
Existing Levels Of Foreign Direct Investment
Apart from being a critical driver of economic growth, foreign direct investment is a
major source of non-debt financial resource for the economic development of China. Foreign
companies are investing in China with the motive of taking an advantage of relatively lower
wages, special investment privileges like tax exemption etc. For a country where foreign
investments are being made, it also refers to achievement of the technical know-how generating
of employment or opening the doors of opportunity for the talented pool of people (Horta, Loret
de Mola and Victora, 2015).
The government of the existing nations are appointing the favourable policy regimes and
giving robust performance in their businesses. The government have ensured that foreign capital
keeps on flowing in China. By almost all accounts, FDI in China has proved to be one of the
major success stories of the past ten years (Horta, Loret de Mola and Victora, 2015). Starting
from a base of less than 19 billion $ in the year 1990 the stock of FDI in China has rose to over
300 billion $ at the end of 1999. According to the 2018 World Investment report, published by
the UNCTAD, China has been ranked as the World second the largest recipient of FDI after
United States and before Hong Kong. Economy of China was ranked as second most attractive to
the multinational companies for the year 2017-2019 after U.S. This growth is favoured by the
liberalization plans; rapid development of the high-tech sector and the establishment of the free
trade zones (Estrin and et.al., 2016).
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Summary and the Recommendations Based On The Assessment
The report is based on the complete economic conditions of the FDI in China. From this
project report it has been concluded that, how the political, economic, social-cultural and
technological factors are influencing or giving benefits to the economic condition of China. The
assignment emphasizes on the national resources and factor endowments that are creating a
competitive advantage on the geographical conditions and on the economy of China (Visser and
Tolhurst, 2017). The report provides a general overview in respect of, what is the current status
of FDI in China and its significance in the respect of the Chinese economy. Further, the
assignment shows that, how the foreign currency and the exchange of foreign currency affects
the growth of economy. The report lays its complete focus in the respect of steps that should be
taken to improve the economy and strategies that, will help in meeting out all those challenges
that are affecting the economy in both the ways. The project further focus on the trade policies;
systems; barriers and practices and the incentives that are given by the Chinese government to
the new industries that are being established in the Chinese market. The Chinese government is
promoting the new industries and adopting the culture of the foreign nations with the motive of
growing in the international market and to prosper with them (Visser and Tolhurst, 2017).
CONCLUSION
By summing up above report it has been concluded that China is the developing country
whose economic growth is quite raises as per the expansion of many companies. Report
concluded that the national resources and factor endowment as well as trade policies of the
country is quite flexible such that country can expand their business into this. Further report also
concluded that there are some level of FDI which should be overcome by the firm in order to
expand their current business.
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REFERENCES
Books and Journals
Fan, H., Lin, F. and Tang, L., 2018. Minimum wage and outward FDI from China. Journal of
Development Economics.
Patra, S., 2018. FDI, urbanization, and economic growth linkages in India and China. In Socio-
Economic Development: Concepts, Methodologies, Tools, and Applications (pp. 313-327).
IGI Global.
Li, X., 2018. The Costs and Benefits to China in Leading Economic Globalization within an
“Anti-Globalization” Environment. In Political Economy of Globalization and China's
Options (pp. 59-70). BRILL.
Wang, D., 2018. Benefits of China’s Green Development to Human Destiny Community
Building. DEStech Transactions on Engineering and Technology Research, (icace).
Yin, H. and et.al., 2018. Balancing straw returning and chemical fertilizers in China: Role of
straw nutrient resources. Renewable and Sustainable Energy Reviews. 81. pp.2695-2702.
Salike, N., 2016. Role of human capital on regional distribution of FDI in China: New
evidences. China Economic Review.37. pp.66-84.
De Beckker and et.al., 2017. Financial literacy-A cross country analysis.
González-Val, R. and Marcén, M., 2017. Divorce and the business cycle: a cross-country
analysis. Review of Economics of the Household.15(3).pp.879-904.
Blau, B.M., 2017. Religiosity and the Volatility of Stock Prices: A Cross-Country
Analysis. Journal of Business Ethics.144(3). pp.609-621.
Visser, W. and Tolhurst, N., 2017. The world guide to CSR: A country-by-country analysis of
corporate sustainability and responsibility. Routledge.
Biswas, A., and et.al., 2015. Sedentary time and its association with risk for disease incidence,
mortality, and hospitalization in adults: a systematic review and meta-analysis. Annals
of internal medicine.162(2).pp.123-132.
Estrin, S., and et.al., 2016. Home country institutions and the internationalization of state owned
enterprises: A cross-country analysis. Journal of World Business. 51(2).pp.294-307.
Horta, B. L., Loret de Mola, C. and Victora, C. G., 2015. Long‐term consequences of
breastfeeding on cholesterol, obesity, systolic blood pressure and type 2 diabetes: a
systematic review and meta‐analysis. Acta Paediatrica.104.pp.30-37.
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Greenacre, M., 2017. Correspondence analysis in practice. Chapman and Hall/CRC.
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