Discuss about the Comparison of Innovation Policy and Opportunities.
The present international market environment has impacted the economies as well as the markets. From the period of last two decades, there has been observed significant fluctuations in the marketing trends. There were several transformations in the world, ranging from restricting of the markets to economic crisis. In the era of globalization and industrialization, the companies are considerably attracting towards the developing and emerging economies. There are several nations which possess rising GDPs such as India, China, Mexico, Brazil etc. These nations are the targeting countries for international trade and investments and have utmost chances of leading the global economy in the coming future (Mathews, Ribeiro and Vega, 2012).
From the overseas trades to the political strengths, the developing economies play a vital role in controlling the international market. The developing nations are recognized as the global emerging markets. The investors consider the developing markets as the potential investment accomplishment. The developing markets are the one which are not recognized as completely developed but at the path of developing rapidly with an increasing arte. The following report will highlight the attractiveness of China as one of the highly developing and emerging economies and favored destination for trade and investments (Ramasamy, Yeung and Laforet, 2012).
China is recognized as one of the top most and leading developing economies which is attracting high foreign investments. From the capital availability point of view, in the early 2000s, the United States was overtaken by China in the category of largest beneficiary of foreign capital (Lin, Yang and Shyua, 2013). The foreign direct investments are those capital investments which an external investor is willing to place in some another local region based upon the economic conditions of that region. China is continuously developing with an up surging rate and this fetches the attention of the investors for having trade and investments in China.
From the competitive point of view as the attractiveness of China as a trade destination is more dependent upon the development of its business value chain, workforce skills, productivity, resource availability and infrastructure. China is considered as more attractive with the level of maturity of all these above mentioned factors possess in comparison with the other emerging economies such as India, Indonesia, Mexico, etc. (Ramasamy, Yeung and Laforet, 2012). A developing economy has an essential need for potential and improved resources and infrastructure for facilitating the sales of services and the goods. Because of the maturation of these elements, China has vey squat transaction costs that results in high earning on the investments and thus it boost the rate of investments in the country. In China, there are also available skilled and competent labors at very low prices; this ensures the foreign investors that can achieve higher productivity at very low prices (Whalley and Xian, 2010).
From the regulatory aspect, it is identified that the regulatory forces have their major role in impeding or encouraging the foreign direct investments in any region. Extreme or too many regulations results in hindrance of the business activities, as the employees as well as the managers have to spend additional capital and time for complying the regulations and rules. The investors or the several MNCs which plans to have expansion or trade and investments in China, the factors like regulations, compliance, legal exposure and start-up costs etc. can encourage the investors for having trade in China as China offers leverage several positive reinforcements in regards with these factors. In China, there is vast governmental support which is offered by the regulatory bodies such as tax benefits, providing subsidies and offering government loans and grants. The businesses make high profits and revenues because most of the financial inducements are sponsored by the government (Barboza, 2010).
From the stability perspective, the investors usually select those nations which have high economic and political stability as the stability demonstrates the opportunities for the businesses to have sustainable future in the overseas region. China possess a virtuous justice system which ensures that there is elimination of corrupt of rogue practices so that there can be offered improved safety to the offshore trade investments and therefore there can be greater economic development of the country (Lee, Syed and Xueyan, 2012).
From the business climate and marketing aspect, it has been evaluated that there are several positive factors which fetches the attention of the investors. The primary factor is the size of its markets and the population. The higher the population size is, the better are the opportunities available for the investors for expanding their reach. The markets of China are highly extended which acts as one of the key reason for selecting China as an investment destination (Ramasamy, Yeung and Laforet, 2012). The economy of China keeps on maturing, evolving and prospering which results in rise of the industries in sectors like luxury goods, robotics, engineering and technology. From the last two decades the Chinese economy has experience huge number of foreign direct investments which leads to increase development t of the economy in all aspects. And the mote it will progress in future, the greater will be the number of FDIs provided by the investors (Chen, 2011).
Openness to the international and regional trade is one of the key prospective of performing trade and investment in China. In China, there are export-friendly policies which give rise to investments in China by foreign investors. There is a business friendly environment and free trade agreement in the country which supports the emerging economy through huge investments (Riccardi, 2016).
The economic facts of China demonstrate that the GDP of the nation is rising with a potential rate which strengthens the economy and fascinate the foreign investors. As per the 2012 data, the FDI stocks was $832.9 billion which shows that the economy is continuously booming and the foreign investor is one of the key factor behind the economic development of the country (fdiattractiveness, 2014).
At the time of performing overseas trade and investments, there are also some kinds of international challenges or barriers which the investors or the multinational companies face. China has multiple potential elements which emphasize the traders and foreign investors to invest in the country but at same time, there are factors which restrict the investments of many foreign entities. These challenges comprises of number of things such as the judicial system is found to be biased as they try to save the Chinese locals from the global competition and because of these there are separate laws and regulations for the foreign traders and organisations and for the local retailers and this results n development of unethical business practices (Overholt, 2010).
There is also a policy of mandatory joint venture, in which it is mandatory for the foreign investor to have partnership with a local Chinese company or with the government agency, and then only the foreign investor is allowed to carry out the operations in China. Thus, such restrictions bind the various foreign investors as they want to have a separate entity rather than a joint venture with an existing Chinese company (Liu, 2012).
There are some other factors also which hinders the increased amount of foreign investments in China such as fake products, counterfeit currency, kidnappings, blackmail, criminal activities and violence. All such issues decrease the efficacy of the country of carrying out trade activities. The foreign traders or the companies do not found a secured and safe working environment and this result in decrease of foreign investments in the nation.
The another key factor is the increasing market competition, China is one of the most developing nations and so the number of MNCs performing business in China are rising and this gives competition threat to other foreign trader and the companies who are planning to invest in China (Tse, 2010). Therefore, all these factors restrict the foreign trader to have substantial investments in China.
There are few policy recommendations for the investors to overcome the challenges identified in the analysis of China and its economy and market.
Conclusion
Making foreign investments is a significant element of globalized and industrialized world. The developing and emerging economies are leading the world of investments. Because of enormous growth and profit opportunities, the foreign investors are highly attracted towards these developing markets. From the report, it has been concluded that China is one of the most developing economies which offer potential opportunities to several foreign investors and supporting them to expand their business. The report has highlighted several budding factors of Chinese economy such as large population and market size, highly developed infrastructure, advanced business value chain, competent workforce, higher productivity, enormous resource availability, etc. all these factors boost the investments in the nation and developed China as one of the most favored investment destinations.
But with huge potential and budding opportunities, there are also some challenges, which the investors are required to identify, analyze and manage for successful trade and investments. The policy recommendations can help the foreign investors in having a more strategic and successful investment in the states of China. Therefore, kit is concluded that, the developing nations are a major source of revenue generation by the means of foreign investments, but at the same time it is also essential that the investors must perform an effective analysis of the emerging countries and the investment deals.
References
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Fetscherin, M., Voss, H. and Gugler, P., 2010. 30 Years of foreign direct investment to China: An interdisciplinary literature review. International business review, 19(3), pp.235-246.
Lee, M.I.H., Syed, M.M.H. and Xueyan, M.L., 2012. Is China over-investing and does it matter? (No. 12-277). International Monetary Fund.
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Mathews, G., Ribeiro, G.L. and Vega, C.A. eds., 2012. Globalization from below: the world’s other economy. Routledge.
Overholt, W.H., 2010. China in the global financial crisis: Rising influence, rising challenges. The Washington Quarterly, 33(1), pp.21-34.
PwC, 2013. Doing business and investing in China. Pp.190. Accessed on: 11th April, 2017. Accessed from: https://www.pwccn.com/en/migration/pdf/iic-full.pdf
Ramasamy, B., Yeung, M. and Laforet, S., 2012. China’s outward foreign direct investment: Location choice and firm ownership. Journal of world business, 47(1), pp.17-25.
Riccardi, L., 2016. Investing in China Through Free Trade Zones. Springer Berlin Heidelberg.
Tse, E., 2010. Is it too late to enter China. Harvard business review, 88(4), pp.96-101.
UNCTAD, 2016. WORLD INVESTMENT REPORT 2016. Investor Nationality: Policy Challenges. Pp.232. Accessed on: 11th April, 2017. Accessed from: https://unctad.org/en/PublicationsLibrary/wir2016_en.pdf
Whalley, J. and Xian, X., 2010. China’s FDI and non-FDI economies and the sustainability of future high Chinese growth. China Economic Review, 21(1), pp.123-135.
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