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SEMINAR REPORT: III

Subject: Business Environment

MBA SY Sem III

PANKAJ KAPSE

Roll No: 18

MBA SY Sem III

SRTMUN

Sub Centre LATUR

8/8/2019 BE Seminar (3)

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China FDI rises despite western concerns

over business environment

Foreign Direct Investment (FDI) in China spiked up f or 13t h straight  mont h in August, despite complaints f rom t he US and European companies over alleged 

un f air business environment  and t he Chinese government's f avors f or domestic 

 f irms. 

FDI to China increased by 1.4 percent  to $7.6 billion in August year-on-year, according to t he Ministry o f Commerce. 

From Jan-Aug, total FDI stood at $65.96 billion, up 18 percent  compared wit h t he same period last year. 

According to a recent  report f rom t he United Nations (UN), China, which stood second in attracting FDI globally in 2009, will remain t he most  attractive destination until t he end o f 2012. 

In 2009, FDI to China stood at $95 billion while t he US attracted $130 billion, t he UN report  said in July. 

On Monday, Chinese Premier Wen Jiabao gave assurance on creating level playing f ield f or f oreign companies in t he country. In reply to growing concerns over his policies f avoring domestic companies, he also promised equal treatment f or all products made in China in government  procurement. 

Last week, t he European Union Chamber o f Commerce expressed concerns over t he barriers f or its members in China, contending t hat  t here existed discrimination in en f orcing environmental and labour laws and in certi f ication requirements f or market  access f or f oreign f irms. 

A similar concern was expressed by t he US in July over China·s indigenous innovation policy t hat  supported domestic technologies. 

The European and t he U.S. trade bodies said t hat  t heir products are not  treated on par wit h t he local products and t he new rules f avor domestic companies in government  procurement. 

Earlier t his week, World Bank·s president Robert Zoellick urged bot h t he countries to go cautiously on trade issues, adding t hat  protection measures were quite dangerous. 

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Wit h China being t he top destination, t he FDI globally is estimated to reach $2trillion by 2012, according to t he UN·s trade and development  agency. 

Analyst  see low-cost  labour and domestic market  potential as t he main reasons behind increasing FDI f lows to China. 

The rise of foreign direct investment (FDI) During the Mao period (1949-1976), China spurned foreign

investment and paid back all its foreign loans (mostly to the Soviet

Union) by 1965. 

After taking over

economic policy at the endof 1978, Deng Xiaoping

opened up China to

foreign trade andinvestment and in theearly 1980s the first

Special Economic Zones

were set up to absorbdirect investment from

Hong Kong and elsewhere. 

During the 1980s, FDIinflows grew steadily but

remained relatively low,confined largely to joint

ventures with Chinesestate-owned enterprises. After the Beijing Massacre in 1989,

western and Japanese companies withheld investment in China, but

the momentum was maintained, partly by a new influx of capital.