Inward Foreign Direct Investment Research Articles

Inward FDI in China and its policy context in 2012

China remains the pre-eminent recipient of inward foreign direct investment (IFDI) among developing countries. FDI flows to the country continued to rise even during and after the recent global financial and economic crises, when many multinational enterprises (MNEs) found themselves in difficulties, demonstrating the continuing popularity of China as an investment destination. Nonetheless, other developing countries, such as Indonesia and Vietnam, are starting to steal China's thunder, offering themselves as cheaper alternatives. Although FDI stock in China reached a new high of US$ 711 billion in 2011, IFDI attraction is losing its former high priority in the Government's arsenal of economic policies, especially as the focus is turned ever more sharply on promoting outward investment. Now that domestic enterprises have taken over most of the functions provided by foreign investment in the first two decades of economic reform (i.e., the 1980s and 1990s), IFDI policies are being concentrated on honing the investment attraction effort to bring in foreign investments capable of filling gaps in the country's industrial structure and helping China meet policy goals such as environmental protection and energy conservation.

Inward Foreign Direct Investment in China and its Policy Context

This study discusses that, after opening its doors to foreign trade and investment in 1978, China has become the largest recipient of inward foreign direct investment (IFDI) among developing and transition economies. The early policy of investment attraction by means of fiscal incentives and special economic zones has been relaxed now that many, though still not all, operating environment deficiencies have been effectively addressed. And strong domestic enterprises have developed. While China remains the developing world's favorite investment destination, the government is adopting a more selective approach that may result in slower IFDI growth. Although the global crisis reduced FDI inflows to China, this impact was lower than in many other FDI destinations, and flows have recovered considerably.

Inward FDI in Canada and Its Policy Context

Canada has actively participated in the corporate globalization process and is a major importer of foreign direct investment (FDI). Canada’s high levels of inward FDI (IFDI) over the past 25 years reflect its improved business climate, reduced restrictions on foreign ownership, and a prospering economy. Like other developed economies, Canada experienced declining FDI inflows in 2008 and 2009, largely due to the dramatic fall in mergers and acquisitions (M&As) and the global economic recession. However, the outlook for 2010 and beyond is promising because of expected economic expansion in Canada and other countries, and improved global financial markets. Moreover, the Canadian government has sent strong signals to foreign investors that Canada is open for business by, among other things, lifting restrictions on previously protected sectors and increasing the financial thresholds for the review of foreign investments.

The Economics of FDI: A Canadian Perspective

This paper reviews trends in inward foreign direct investment (IFDI) and multinational production in Canada, as well as Canada’s direct investment abroad, and provides an assessment of their impact on the Canadian economy. It pulls together a large body of existing empirical literature in Canada and other countries on the economic costs and benefits of FDI. The main conclusion of the paper is that both inward and outward FDI provide significant net long-term economic benefits to both home and host countries, provided they maintain competitive and dynamic product and factor markets as well as a competitive business climate. In addition, there is little evidence of a ‘hollowing-out’ of corporate Canada in terms of multinational enterprises operating in Canada moving their corporate headquarters out of the country.

Killing Five Birds with One Stone: Inward Foreign Direct Investment in Post-Crisis Korea

the first 35 years of the Republic of Korea's2 economic development, the government showed a clear preference for foreign capital in the form of loans rather than inward foreign direct investment (IFDI) as a means of financing its development plans. This reluctance to allow a greater degree of foreign participation in the domestic economy stemmed from a desire to control the allocation of financial resources and also reflected public concerns that increased levels of IFDI might lead to foreign domination of the Korean economy. The 1997 crisis led to a fundamental change in Korean attitudes towards inward investment, as a desperate need for capital, advanced technology and know-how prompted a comprehensive reform of FDI policy and promotional systems. However, while many Koreans recognized the contribution made by inward investment to the country's economic recovery and its potential role in promoting sustainable growth, anti-foreign capital sentiment lingered in some areas of society. The past two decades have seen a remarkable increase in global flows of capital and credit, most notably in the form of foreign direct investment. Although FDI in developed countries has accounted for the lion's share of these transactions, flows to developing countries have also accelerated in recent years. The rising level of inward investment in developing countries reflects, to a significant extent, changes in their perceptions of and attitudes towards IFDI. Whereas, in the 1970s and early 1980s, many potential host countries expressed concerns that inward investment might create monopolies, exploit the local economy and restrict competition in the domestic market, this negative view had changed to a more upbeat assessment by the 1990s, as scholars and practitioners had identified a range of beneficial effects of inward FDI in terms of promoting economic development.3

U.S. politics and greater regulation of inward foreign direct investment

An analyst of U.S. foreign economic policy observes that each wave of antiforeign sentiment associated with the surge of foreign direct investment (FDI) coming into the United States washes ashore a flotsam of restrictive and exclusionary laws that recedes slightly or becomes buried and forgotten in the sand only to advance again with a new wave. During the late 1980s, the controversy generated by the sharp rise of Japanese acquisitions in the United States washed ashore the latest flotsam of regulatory measures and further advanced the tangle of rules and regulations targeting inward foreign direct investment (IFDI). Of the various types of FDI, the present study is concerned mainly with the policy change toward foreign investment in an already established domestic business. This type of investment often involves merger or acquisition and is distinct from a “greenfield” investment where the foreign investor establishes “from scratch” a new business in the host economy.