The international investment

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Description:

The international investment includes both foreign direct investment (FDI) and portfolio investment. FDI is the movement of capital across national frontiers in a manner that grants the investor control over the acquired asset. Thus it is distinct from portfolio investment, for example buying some shares in foreign capital market, which may cross borders, but does not offer such control. In the years after the Second World War global investment was dominated by the United States, as much of the world recovered from the destruction wrought by the conflict. The U.S. accounted for around three-quarters of new international investment between 1945 and 1960. Since that time international investment has spread to become a truly global phenomenon, no longer the exclusive preserve of OECD countries.

Enablers:

  • Changing economy policy of developing country with the aim of gaining advanced technology and collecting more funds for developing welfare and balancing payment effects.
  • Multinational enterprises want to gain more market share in other countries, especially in developing countries with great potential markets like China.
  • Regional integration like EU removes or lowers the trade barriers.
  • Development in information technology and transportation supports both FDI and portfolio investment.


Inhibitors:

  • Policies of protectionism and controls so as to insulate home-grown industries from the fast growing threat of globalization.
  • World economy cycle.


Paradigms:

The National Bureau of Statistics of China reported that China’s GDP reached RMB10.2trn in 2002, up 8% from 2001. The three engines propelling growth under adverse international climate included consumption, export and investment. In particular, foreign direct investment (FDI), along with government investment, contributed to lift the overall investment in China.

Global flows of FDI have grown phenomenally over the last ten years. Total inflows rose by nearly four times, from US $174 billion in 1992 to US$ 644 billion in 1998.

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