Foreign Direct Investment---Economics Essay Example | Topics and Well Written Essays - 2000 words

Foreign Direct Investment---Economics - Essay utilizationWhat exactly atomic number 18 international chair investments, and why have they increased so steadily What factors commence strange direct investments such a popular global occurrenceA foreign direct investment, as the name states, involves corporations who invest long term oerseas. There are four types of FDIs for business corporations to aim from. The most commonly preferred for more corporations are mergers and acquisitions. They involve a transfer of assets from the originating corporation to the star which is foreign based. (Wikipedia, 2006). Greenfield investments are investments or expansions for a new corporation. There are two forms of vertical foreign direct investments which involve backward vertical FDI and forward vertical FDI. Backward vertical FDI involves an out of the expanse business which provides resources/assets to a domestic business. Forward vertical FDI involves a business abroad that sells th e amount produced of a businesss domestic production(s).A.T. Kearney Inc. is a global management consulting firm that is an active member of the Global Business polity Council. This council aids and advises head executives on geopolitics, macro sparings, technological changes, and macroeconomics worldwide (A.T. Kearney, 2006, p.1). A.T. Kearney spent over seven years canvass numerous head executives from over one thousand corporations worldwide for their opinions on future FDI growth and objectives. The companies and their executives that were surveyed be seventy percent of the cumulative FDI. In December 2005, A.T. Kearny published their findings in their FDI Confidence Index. The survey was comprised of lxviii countries that contribute ninety percent of the global FDI (A.T. Kearney, 2006, p. 2). They selected the top twenty-five countries according to their FDI confidence. These countries were ranked by a score given from zero to three. Scores closer to three was given to thos e countries with the highest amount of FDI confidence. For example, China sure the highest FDI confidence rating for a score of 2.197. Why would China be interested in foreign direct investments A country such as China is interested in FDIs to improve the economic state of its own country based on the numerous benefits of foreign enterprise investing. There are many advantages and attractions for foreign markets to invest in one of the worlds largest and growing markets. Chinas population was estimated in 2005 at over 1.3 one million million people. It holds a large share of twenty percent of the worlds total population estimated at 6.5 billion people. (Prasad, Eswar & Wei, Shang Jin,2005). Many multinational corporations will choose to invest in densely populated countries such as China. Companies will choose China because their own country lacks a sufficient tire out supply. The cost of Chinas labor force is dramatically low in comparison to other surrounding Asian countries. M any foreign direct investors have found this cost effective and have created and brought millions of jobs to China. The US, a country which owes the majority of its periodic population growth from immigration, would find China to be a valuable source of manpower as well as an ever increasing and developing economy. On the other hand, the population growth has make so overwhelming high for China that the government has had to