Foreign Direct Investment

Foreign Direct Investment

Foreign direct investment can be understood as the placement of long-term capital in a foreign country, which is called the host country for the creation of new businesses in order to internationalize them. This investment has the potential to generate new jobs, increase productivity and transfer skills and technology, and mainly contributes significantly to economic development.(unctad, 2002)

Currently, FDI has become so important to the countries that most governments now offer incentives and benefits to those companies that choose their country as a place to establish their operations, meaning that the chosen as the host country. Spain, Ireland and China are countries that have different, both social and economic history and maybe some similarities, but both have created and established their own models for FDI so they can promote their country.

FDI in China

Since 2001 China's WTO accession, the country ranks as the largest recipient of FDI in the developing world because it has a successful model of controlled trade openness, which has caused difficulties for Latin American countries, they have not been able to catch up with China.What is attractive to investors is that this country has comparative advantages such as population size, geographical position and diversity in natural resources, and for this and other reasons made China experienced rapid economic growth since also offers low recorded in the working-land factors.

The largest investor of FDI in China with approximately a little bit less than the 50% is Hong Kong, followed by USA, Japan and Europe, but really with a relatively low percentage of participation because they only represent aprox. 8% respectively of FDI in China, as these countries have not shown a clear preference for investing in this country; Although the current U.S. government has taken measures, including policies for the protection of technology and greater independence, while maintaining restrictions on the entry form certain activities and forms of ownership.

Among the main reasons which led to more than 430,000 foreign companies to invest in China are that China has become one of the largest market in terms of population which in turn assures potential customers, plus the cost of labor in China are very low compared to developed countries and that is flexible and have a very high learning ability. Still, with this rapid growth, China still has barriers and disadvantages that have marked on the world market, one of the most important is the language since it is very complicated and difficult to trade, such as piracy or irregularities the black market are situations that affect business and that can take the appeal to the country.

Some studies suggest that a quarter of total FDI in China is with domestic investment channeled through Hong Kong (4). This happens because Chinese investors try to take advantage of tax incentives granted to FDI. That is why FDI in China may be overestimated. On the other hand China is also encouraging FDI few years out, mainly mergers and acquisitions, establishing new companies in countries like Argentina, Brazil, Chile and Mexico, investing in infrastructure, seeking cooperation agreements in technology and knowledge,

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