Opportunities in Mainland China
In the Gradual and Limited Opening stage, the Chinese government implemented special incentive policies in Special Economic Zones (SEZ), of which three were in Guangdong, and the other in the Fujian provinces of mainland China (Xinzhong, 2005). The FDI inflow was restricted to the SEZ between 1979 and 1983. FDI was in the vicinity of some 1. 755 billion USD. This figure shot to 10. 301 billion USD, when the communist leadership opened 14 coastal cities and some ten provinces to FDI between 1984 and 1988. Slowly, more and more provinces were opened to foreign investors, and by 1991, the total FDI inflow touched 11.245 billion USD Xinzhong, 2005). The success of the first stage was enough for the government to initiate the development of other provinces through FDI.
China’s economic reforms took a turn for the better with the Chinese Premier, Deng Xiaoping undertaking his famous tour to the southern regions of China (Xinzhong, 2005). He sprung a surprise by declaring that his government would encourage the development of this province through foreign equity participation. In 1992, the country announced its market-oriented economic reform and the open-door policy Xinzhong, 2005, p. 5).
Premier Deng’s speech encouraged foreign enterprises to invest in China, and FDI grew 4 times than that of 1991 to reach 58. 1 billion USD. China moved forward to become the second largest recipient of FDI in the world after the United States, and the largest recipient among developing countries. The nation was now fast becoming the most-favored nation in the world in terms of FDI inflow. However, the Asian financial crisis in 1997 at the time when China’s accession to the World Trade Organization (WTO) took place slowed the inflow of FDI, with a recorded setback to inflow by 40% and a negative growth rate of almost 12%.
The stage was set for the third phase of the initiation. China’s accession into the WTO brought new and better open policies regarding FDI. The world economic order was reeling under a cloud of circumspect, but China’s economy was stable. Despite the decreased FDI inflow, it was ahead of the world’s annual FDI inflow increase percentage (Xinzhong, 2005). China’s accession into the WTO attracted more investors as; they had access to wider business opportunities, made available through the circulation of government investment directory (People’s Daily Online, 2004).
The directory pointed to ways in which Chinese business houses could obtain superior technology for market competitiveness and exports. Foreign investors too had access to this database to channel their capital and research into areas untapped before. They could search lucrative virgin territories such as heavy and light equipment production houses (People’s Daily Online, 2004, para. 2). Analysis Most of the FDI that came into the country targeted the Eastern region of the country. The flow of FDI into the middle and western region of the country was negligible.
The reason for this could be attributed to the infrastructural and transportation availability in these parts. Most of China’s sea ports are on the east coast. However, the strategy to develop interior regions within the country, give scope for attractive government subsidies and tax rebates. These parts remain a source for cheap labor and raw materials. With the support of the government machinery, investors will be able to negotiate and receive favorable operational conditions that match or beat their contemporaries in the eastern region. The following graphic and tabular representation gives a fair idea of what investors stand to gain.Sample Essay of PaperHelp