FDI IN CHINA AND CANADA

Evaluate the attractiveness of China and Canada to firms considering Foreign Investment

Evaluate the attractiveness of China and Canada to firms considering Foreign Investment

Introduction

Globalization has produced a new model for economic modernization based on foreign direct investments (FDI). The United States and Germany in the 19th century, and Japan and Korea in the 20th century all used versions of the “import substitution” approach to develop their industrial bases. China and other developing nations in Asia, many Latin American countries, and the transitional economies of Central and Eastern Europe have opened themselves to FDI transfers of advanced technologies, business methods and entire enterprises by the world's most advanced and competitive foreign corporations. These transfers involve joint ventures with local companies in developing nations or the establishment of new foreign affiliates or subsidiaries. The result has been the most rapid modernization of the industrial and service bases of scores of nations, the fastest worldwide growth, productivity gains, incomes progress on record, and a new dependence on attracting the foreign direct investment.

The FDI-based enterprises also stimulate the expansion of local firms or the creation of new domestic businesses to provide local goods and services for the new enterprises. FDI-based modernization increase demand for other local goods and services, supporting jobs, incomes, government revenues and the broader expansion and modernization of the developing or transitional economy.

China and Canada began to induce foreign capital in the late 1980s, giving up its policy of isolation, known as “self-reliance” of the Cultural Revolution. Initially, both foreign loan and foreign direct investment (FDI) were introduced as supplementary source of capital needed for economic development. However, as time passed, FDI was preferred because it provided not just capital but also technology, management know-how, and even exports market as a package without repayment obligation from the Chinese side. Consequently, FDI had become the main form of using foreign capital in China by the early 1990s.

This paper will examine the relative attractiveness of China and Canada to firms considering foreign investment for Car manufacturing industry and Smartphone industry. The evolution of China's and Canadian government policy on FDI facilitated the growth in various industrial sectors of the economy. This directly impacted on the economic condition of the country. Consequently, emergence of free-trade policies and bilateral agreements between nations attracted many investors to move their business operations in emerging economies due to level economic structure and viability of conducting business operations. This paper assesses the contributions of FDI for Chinese and Canadian economy and associated risk in the economy deriving the foreign investment structure.

Business Environment Analysis

Multinational companies are playing a significant role in economic restructuring process across different regions of the world. Different regions pose different significance in terms of attractive business environment and flexible operational policy environment.

MNCs get opportunity to support its functional alignment towards efficient allocation of resources and maximizing its output. Asia-Pacific region is an attractive region for business entities that aim at reducing their operational cost. Numerous factors play their key role in enhancing ...