Chinese Economy


as quite impressive figures on investment, but three particular factors prove that this is still a challenging market. complex consumption patterns, poor regulatory climate and competition from locals. These areas will be the main areas of concern in the essay because they have been cited by several foreign investors in the country.

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Prior to dissecting the attractiveness of China as an FDI destination, it is imperative to first define the term. Graham and Spaulding (2005) describe foreign direct investment as the process by which a business entity from one country makes an investment in another country through physical assets or management interest in a foreign company. FDI may manifest through joint ventures, company sets ups, licensing agreements, or other forms of internationalisation processes.

Globally, a number of changes have been witnessed in the area of FDI such as reductions in the cost of communications thus increasing management of these investments. Tariff liberalisation has also become something worth focusing on, while restrictions on foreign investments have been dramatically reduced. Privatisation of industries and de-regulation has acted as a catalyst for the role of foreign direct investment in the global economy. Multinationals still account for the greatest number of FDI ventures globally even though technology is facilitating entrance of less traditional firms (Graham and Spaulding, 2005).

In order to determine whether China is a challenging FDI market, it also critical to determine the qualities that make an area attractive for these sorts of ventures. First, a place ought to have a transparent and thorough regulatory framework. its administrative system should be devoid of red-tape that may hinder approval of the foreign direct venture as require

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