The role of foreign direct investment in China 1979-2006.

Running head : THE ROLE OF FOREIGN DIRECT INVESTMENT IN CHINA 1979-2006

The Role of Foreign Direct Investment in China : 1979-2006

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The Role of Foreign Direct Investment in China : 1979-2006

Introduction

China - one of the fastest growing country in Asia and currently dominating the international trading market through its expanding export industry . Many economists and market analysts believes that the growth of China 's foreign direct investment started from the 1970 's , especially in the 1990s , when the Chinese government promoted the influx of foreign direct investment in

China through political and market-based measures Since the late 1970 's , the volume of foreign direct investment in China has been rising at an increasing rate as more and more investors from other countries forecast a better economic performance on the said country (imf .org , 2002 . Most foreign investors that invest in China put their capital primarily on the manufacturing industry that dramatically improved China 's export industry . During the first quarter of 2007 , the volume of foreign direct investment in China increased by around 12 equal to 15 .89 billion as foreign investors take advantage the fast growing economy of the said country (Oliver , 2007 . One of the many factors that contributed for the attracting the influx of foreign direct investment in China would be its cheap labor that offers great reduction on investors operational /production costs (Bls .gov , 2007 . With the increasing need for the acquisition of more comparative advantage foreign investors easily grab the opportunity being offered by China - comparative advantage of cost minimization and offering cheaper products in the international market . As a result of this , China became the third largest investment destination across the globe after the United States and United Kingdom . Furthermore , with the growing manufacturing industry /export industry of China , it resulted for the stabilization of its external balance that tremendously provided the said country with economic surpluses and income . The preceding part of this will discuss in details how foreign direct investment in China become the main factor behind its high GDP growth and the impact of foreign direct investment on China 's economic development

Economic Reform of China

The influx of foreign direct investment in China started in the early 1970 's after the Chinese government launched its Economic Reform called Socialism with Chinese characteristics ' in 1978 . The main objective of the said economic reform of the Chinese government was to generate sufficient surplus value in to finance China 's modernization Furthermore , the eradication of poverty and the motivation of Chinese workers to produce surplus in to eliminate the imbalances of the Chinese economy served as the pillar for the impressive economic growth of China up to the present times . By early 1980 's the Chinese government was able to cut down their poverty rate from 53 to 8 by 2001 . In addition to this , the said economic reform was also focusing on the creation of pricing system and to minimize the role of the Chinese government in resource...