Real Foreign Investment Research Articles

Does Cancellation of Preferential Tax Policy Reduce Foreign Direct Investment Inflows?

AbstractIn light of recent tax cuts by the US, should China reintroduce a preferential tax policy to attract foreign direct investment? This paper investigates whether China's 2008 tax policy change affected inward foreign direct investment. In contrast to previous studies, we break foreign investment down into suspect and real foreign investment using firm‐level data from 1998 to 2008 and conduct a difference‐in‐difference estimation to determine the effect of the tax policy change on both types of foreign investment and compare these to the effect on domestic investment. The results show that the 2008 tax policy change reduced the amount of suspect foreign investment and its effect on real foreign investment was insignificant, indicating that foreign firms in China are more concerned with the investment environment and economic stability than taxes. Therefore, China should create a regulated business environment instead of readopting supernational treatment for foreign enterprises.

Manufacturing Sector Growth: A Case Study of Singapore

This paper attempts to highlight some of the challenges faced by the Singaporean economy in general and the manufacturing sector in particular. Statistical analysis is used to demonstrate the role of human capital and foreign investment on manufacturing output for the period 1980–2004. The paper shows that a long-run relationship exists among the real manufacturing output per-unit of employment, real foreign investment per-unit of employment and real human capital per-unit of employment. The paper also provides time series forecasts for the growth rates of real output, productivity and investment in Singaporean manufacturing sector.

Real Foreign Investment in Perspective

Much concern regarding recent negative net foreign investment of the United States is misguided. It has frequently reflected misunderstanding of the nature of foreign investment and of misleading official measures. The extent of negative net foreign investment and, all the more so, its sum over the years, which is the presumed debt of the United States to the rest of the world, have been exaggerated. Correctly measured, which means taking into account changes in the value of the U.S. assets abroad that are usually ignored, they are not and do not threaten to be large relative to total income and wealth. Net foreign investment in the long run reflects relative growth and portfolio choices among nations. If the monetary authority does not prevent the fall of interest rates and exchange rates, rates of foreign investment can be expected, within a reasonable time, to be self-adjusting. They will then reflect underlying preferences and economic forces, interference with which is likely to do more harm than good.