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Foreign
direct investment is a process of making access to the capital and assets of a
country by the local entities of other countries. Individuals and companies
outsource their operations in order to get benefits from the lower cost labor.
Companies also consolidate the companies of other countries by purchasing
shares and ownership of the subsidiary company. Foreign inflow direct
investment is to provide opportunities for the other countries while outward is
to invest in other countries
European
international organizations found china as the revenue generating country because
of the lower cost of available production resources and increase of population
that play the role of customer also. The government of the china took the
notice of the situation and changed their policy towards outflow with the
increase in the trend of globalization, outsourcing, and consolidation. While
the situation of the United Kingdom is quite opposite to China
2.
Outward
FDI Analysis of China and UK for the Foreign direct investment
Foreign
direct investment projects the trend of making the investment in other
countries of the world. In accordance with the economics, it describes the
ownership of a company or entity in the other companies in a different country
rather than their own country. Foreign direct investment has two types as
inflow/inward FDI and outward FDI. Both types of FDI has the direct impact on
the GDP and overall economy of the country
3. Current outward FDI
trend and pattern in China for the Foreign direct investment
Outward
Foreign direct investment of a country includes the financial flow and
investment of a country in the other developing countries of the world. The
current trend of outward foreign direct investment in the china is now going to
be strengthened. In the past few years, the inflow ratio was more than the
outward ratio. Companies from the other areas of the world were making the
investment in the china by starting up their production units there because of
the low-cost labor availability. However, now China is also investing in the
foreign world and promoting trade to make the economy of the country strong and
stable
In
one year, duration, the foreign direct investment by a country can be
calculated through the recording of cross-border transaction value. In this
way, financial flows include the transactions of intercompany debt transaction,
transactions of equity, and reinvestment of earnings. Outward FDI of the china
increases the foreign investment and improve the economic condition of the
other countries
Figure 1: Current
Outward FDI in China
In
the comparison to the BRIC countries, China is performing star performance and
with the extensive time the government of China reform all the FDI policies.
China is attracting a higher amount of FDI relatively from the last 18 years in
the comparison of developing countries. The special status of China is due to
the separate set of preferential policies and rules. The policies are for the
development of China and transform the northeast regions of China along with
the western regions
The
guided directory for the development of China regarding the FDI includes four
types of categories such as allowed projects, encouraged projects, restricted
projects, and prohibited projects. In order to improve the levels of exports in
the china, the policies of Chinese government can be subdivided into three
categories such as compulsory, natural, and voluntary
The disproportion is between the national
oversea FDI stock and the income conditions. China has the large potential for
the performance and the investment of international profile level. In the
sectoral distribution sectors, the major changes are for the outward investment
of China and engage the higher range of investment. The large sector for the
business services and leasing process were measured in the terms of the
concentration as in 2008 for the accounting. The near variation was for the
total over 2011-2015. The wholesale trade and retail trade for the mining was
for the financial intermediation and the real estate
The
major five sectors are linked with the investment, the first sector was mining
that includes oil and gas exploration, washing and mining of coal, non-ferrous
metal and ferrous metal processing. As according to the graph, the share
increase was 40.3% regarding the mining and it was the largest sector for the
FDI concentration of the government and the investors. From the sharp contrast
comparison, the FDI sector got more accounted that was 7.7% from all the
regions of total investment.
The real estate investment was 1.8% of the
total investment in the country. The enormous and higher sector of expansion
was observed during the larger proportion of shares in the foreign direct
investment in China. The growth of the estate sector increased and became
triple from the original at 5.3%. The notable annual growth rates were reducing
and decreased to 17.9% in 2015, 67.1% for 2014, and highest was observed during
2013 as 95.9%. In a nutshell, the foreign investment track was not linear but
in fact, the track is diversified and favors the tertiary industry.
In
the investment analysis of China, the foreign direct investment was determined
as three-quarters of all the stock and flows in China during 2015. In some
context, the transitions of China are based on the consumption that leads to
the economy and services. The investment of China is not even for all the
regions in the world as it makes the uneven distribution for the whole world.
From the continent level, the outflow of investment in China is more than 70% of
the whole investment. The ease in the outflow is low particularly in Europe
while the flow expands for 82% of the total investment in 2014. The sharp
decline was observed for 34% and the country level was a part of the whole
investment and small economies. The variation in the investment has an impact
on the financial state of the country. The issues are mixed with the
performance and growth of performance particularly in 2015. The FDI flow of
Australia and the European Union reduced in the comparison of China at 16% and
the 44% on the year to year basis. In the notable flow capital issues are more
than twice the increased and global flows.
The
clustered open economies have attracted nearly 62% of the foreign direct
investment for the outflows and the stock condition is at the 60% of the whole
stock in the yearly reports. The shares of Hong Kong in China are an outward
investment and the flow of investment decreased to 17% of the whole conditions
as compare to the 58% during the year 2013. In the recent years, the significant increases
are considered for the outward FDI of China that was related to the non-state enterprises
and nonofficial FDI stock advanced for the consecutive conditions. The dramatic
changes are based on the ownership of the whole infrastructure. There are two
main factors that can be interrelated such as networks and the channels that
can be established for the medium size entities and for the small conditions.
The investment is growing with the time and evolution in the china and non-state
investors are playing significant roles for the aforementioned sectors and
higher diversification in the medium regarding the foreign direct investment in
the china.
4. Current outward FDI
trend and pattern in the UK for the Foreign direct investment
The foreign direct investment
provides higher information for the values and the measured investment. The
investment can be inward and outward and includes earning along with the flow
of direct investment. The foreign direct investment relates to the cross-border
for the country to country issues. The assets capture all the investment done
by the United Kingdom including the foreign investment and investment of
companies based in the United Kingdom
The global flow of FDI during 2006
increased and exceeded $1.3 trillion for the exchange rate and inflow FDI
became half of all the net capital flow. The FDI flow pattern was established
for the investment of north and south. The countries are emerging and have
significant variation in the originating economics and receiving economics
The increase was in $10.5 billion.
The FDI manufacturing in the UK fell to $16.4 billion, the decrease in
percentage was 11 percent as compared to the $ 18.5 billion as reported in
2005. The FDI of food production increased up to $15.5 billion from $ 5.0
billion. The FDI resources of the UK increased from $9.5 to $18.5 billion for
net disinvestment. The emphasis on resources was on the extractive industries
such as hydrocarbons, quarrying, and mining. The foreign direct investment of the
United Kingdom was 54% and in the case of North America, it was 25%. The
principal area of interest in the present work was geographical areas outside
of the OECD for the United Kingdom and China.
The growth values for the foreign
direct investment positions in the United Kingdom was for the overseas
investment and the liabilities of FDI changed. The increase was observed for
the FDI positions of the United Kingdom and positions held abroad for 2016 FDI
assets. As a result, the position of net FDI in the United Kingdom started
declining and fell to $50.8 in 2015 and $12.5 billion during 2016. The lowest
net positions were observed in 1997 since the comparable records of the
country. The values of foreign direct investment (FDI) liabilities increased to
the high value for the acquisitions and inward mergers through 2016. The higher
transactions for the publicly reported assets were during 2016. The higher
acquisitions were observed for BG groups, ARM holdings, and SAB Miller
Based on the analysis it can be
observed that exchange rate movements were provided with the supports and the
values of FDI assets changed during 2016. The negative direct investment
positions have some sterling rate of exchange that was not depreciated. The net
earnings of United Kingdom foreign direct investment fell down during 2016 and
then the marginal changes imposed a negative impact on the comparable records.
The latest fall in the countries measured in 2011 was due to a downward trend.
The regions that contributed in the
fall of FDI during 2016 were higher and the majority of fall was due to North
America on the contrary FDI credits of United Kingdom increased from EU. In the
case of industry in the United Kingdom, most of the UK FDI credits were highly
attributable for the decrease in the mining and the quarrying conditions were
related to the grouping of the industry. Opposite to the situation the debits
increased for all the board of industries and groups were analyzed. The
analysis of FDI asset values faced decline during 2016 due to decline in the
credits and the appearance becomes attributable for the higher companies and
largest contribution was for the 25 companies of United Kingdom for foreign
direct investment
The credits were remained increasing
for the investment and investors. The value of debits was similar to the FDI
during 2011 and then credits fell down for the period. After that, the trend
continues to higher extend along with the negative marginal net earnings of
foreign direct investment (FDI). The
debit values change for $1.7 billion and it was much higher than the credits while
the credits were equivalent was 1.5% as compared to the current account
balance. The return rate of the UK was $50,000 and the values changed to $1
million. The return rate was 5% and the higher values of investment were on
income.
Figure 2Outward
FDI trend in UK and China
Figure 3
Comparative Analysis
Figure 4Outward
FDI 10-year Data
5. Factors that shaped
the outward FDI patterns of the Foreign direct investment
Foreign
direct investment plays the significant role in the development of the overall
economy of the world and countries that are directly or indirectly linked with
the process of outward foreign direct investment. There are a number of factors
that directly or indirectly influence the outward foreign direct investment of
the china and United Kingdom. Some factors have great influence that shapes the
overall trend of outward foreign direct investment in the whole world as global
trends and dynamics.
6. Institutions of the
Global economy
The
institution of the Global economy is playing their roles effectively in the
world to enable the world progress rapidly with the collaboration of their
countries. Because of globalization and outsourcing under-developing and second
world countries also get the opportunity to earn better revenue and bring
changes in their lifestyle
While
on the other side investor country earn more profit by building profit margin
in the expense and revenue. As through making the investment in other countries
they can reduce the expense of raw material and labor force. Thus, both
countries take advantage of the currency difference
There
are many international institutes are working for the global economy as World
Bank and international banks. In the kingdom of United Kingdom, the major institutes working for the
global economy are Institutes of Economic Affairs, National Institute of
Economics and social research, Institute of global law, economics and finance,
and global governance institute. While on the other side the institutes of the
global economy in China are also dealing with the programs and policies that
encourage the global trade and foreign direct investment
Government
and political institutes of the United Kingdom and China encourage and motivate the inflow of the foreign direct
investment and outward foreign direct investment by making supportive policies
for the foreign investment. The government set the tariff on the import and
export of the goods in the international market
United
Kingdom tax rate on export in other
countries of the world is more than the rate set by the government of the
china. While on the other hand, the United Kingdom is also unlucky for outward foreign direct investment as taxes on
export other than European countries is higher than the tax rate of European therefore,
they are mostly limited to the European countries only. The tax rate on the
trade within the European countries is almost free for the United Kingdom
The economic institutes of both countries
are working as the formal organizations in order to undertake the activities.
Society members are the major stakeholders of the company; therefore, they
create such institutes to run the factions in the appropriate manner. According
to the definition of the institutes by the North in 1990, institutes are like
the rules in a game that formally shape the human interactions. Economic
institutions in the china and United Kingdom provide bases and framework for the whole activities conducted in
the country in the economic and financial manner. Global economic institutes of
China motivate the economic activities as foreign investment, economic
development, entrepreneurship, and trade in the international market. The main
role of these institutions is to develop the framework for the consumers and
other investment related industries in order to provide guidance and assistance
in the spending, foreign exchange operations, and investment process.
According
to the analysis of 2008 because of the assistance of the institutions of the
global economy China earned the increase in GDP with the percentage of 10.4.
Because of this powerful contribution China appeared as the big power in the
outward foreign investment in the overall OECD. In 2008 China recorded the
outward foreign direct investment was 56742 and at that time the United Kingdom
the outward foreign direct investment was recorded 197411. Economic
institutions of China worked hard, developed new policies, introduced new
strategies, and get entrance in the diverse markets to make improvement in the
outward foreign direct investment. As a result of all this in the just short
time duration of 4 years, China started leading the United Kingdom. According
to the records of 2012 outward foreign direct investment of the United Kingdom
was 20767, and China was 64963 that is more than $44196. Thus, the whole
situation is clearly describing that institutions of the global economy have
direct influence over the foreign direct investment and economy of a country.
7. Arguments: Global
economic trends and dynamics
Global
economic trends and dynamics fluctuate
with the passage of time and change in the international market. In the past
companies were only limited to make the investment in their own countries.
Management and business person were with the claim that by going outside the
country to avail financial benefits as low-cost labor and cheap material
availability companies suffer a lot as handling a diverse and quite different
type of labor is not an easy job. Culture and language barriers played the
effective role in this case. It was considered difficult to hire quite diverse
labor for operations as because of difference in the culture of management and
labor chances of conflicts get the increase. Employees motivation and job
satisfaction are must for the improvement in performance. Therefore, at that
time, it was considered that even the expense can be reduced through
outsourcing but the cost of production and error in production will get the
increase that is not desired to for customer's satisfaction. While now trends
are getting changed. New modern management courses have enabled the managers to
handle the cross-cultural and diverse labor. In the modern business world
developing the relationship with the labor of other countries and starting
production units in other countries is getting common. One major reason for
this outsourcing is the strategy of the companies to expand the target market
of the company in a geographical way. Through geographical expansion companies
increase customers and sales. Therefore, the trend of outward foreign direct
investment is increased in present times. China is rapidly adopting the changes
and trends in the world. China started investing in the other countries of Asia
and Europe. For instance, China is investing in Pakistan and Africa. The trend
in the outward foreign direct investment is going upward in China as the figure
2 outward FDI trend in the United Kingdom
and China describe the trend with years. On the other side trend and
dynamic are also impacting the outward foreign direct investment in the United
Kingdom. The United Kingdom faced
many ups and downs in the outward foreign direct investment.
The
overall global trend in the outward foreign direct investment is going towards
slow recovery after facing the steep decline trend. According to the analysis
because of change in trend outward foreign direct investment was decreased 18%
from the previous records in 2009. The global market made recovery in the first
half of the next year. During 2011 and 2012 global market projected great
momentum. The rise in the outflow was actually made after 2013. In the whole
situation, the United Kingdom was
showing negative results and China records as one of the leading countries in
outward foreign direct investment.
8. Global movements of
goods and factors of production
Factors of production and movements of goods that has the impact on the
outward foreign direct investment are wages rates, labor skills, transport and
infrastructures, commodity and clustering effects. Factors of production are
land, labor, capital, and entrepreneurship. Consumption of goods in the country
contribute or stand against the outward foreign direct investment
Companies produce products at a cheap cost in China and sell
in China also while selling in other markets
Companies of the United Kingdom can easily purchase land while when china tries to start up a
production sector their expense goes up because of deference in the currency
value
Therefore, when they make the investment in the other countries,
they take advantage but China pays more amount in transportation investment
The United Kingdom also exports products to other countries
at the time of delivery they calculate the charges of transportation in the
cost of the products that increase the cost and price. When they move products
in the metropolitan areas, they use trucks to move the products around to the
delivery market. Tangible goods like pens, machinery, and mobile phones are
easy to move around as compare to the vegetables, fruits, meat, eggs, and other
packed foods
Automobile companies
of the United Kingdom and China open their outlets in the targeted countries
and access the services of shipment agencies for safely delivering the products
to the targeted market. They produce and
assemble the cars and other products and store in their warehouse and bring
into the market when demand rise
9. Role of international
business organizations and their activities
International
business organization as multinational companies are working almost all over
the world. Geographical expansion of the multinational companies is because of
their cost-effective production strategies
These
multinational countries have their production sectors in various areas of the
world. Companies of the United Kingdom are starting up developing production
units in other countries because they are covering the large geographical area.
Goods movement from Europe to Asia (as Asia is one of the largest consumer
markets in the United Kingdom) increases the transportation and shipment
expense. And it comes to the large-scale increase in expense reduces the profit
margin for the companies that are not affordable in the highly competitive
markets.
Therefore
companies of the United Kingdom and China are going towards outward foreign
direct investment in the countries where the tariff rate is lower than in their
country
Big
organizations like nestle create their own farms of vegetables, fruits, and
dairy products to provide healthy food to the customers. They develop the
agriculture of the country. China is leading the world in this manner also
10.
Issues
in international activities
There is a significant increase in
the outward FDI and China can be attributed to a number of factors. These
significant factors include low-cost labor and the abundant supply is no longer
for the country. The shift in development model was for the consumption that
led to the growth pattern. The Chinese enterprises are significantly higher for
the manufacturing process and the construction process
The recent key drivers that boom in
China is related to the infrastructure investment. The second issue is security
concerns in the country that adds hindrances to the sustainable development of
the country and social stability. China is making efforts to improve and ensure
the access to energy resources and supply of raw materials that supply to the
world. The upgrading of the industry depends on the growth of investment and
upstreaming of the industries. The financial crises and international
investment are facing higher and strong headwinds. The economic deleveraging
for the corporations appears for the world phenomena
The faster growth of global
economics is higher particularly in BRICs countries (Brazil, Russia, India, and
China) while the forecast was higher and major centers include economic growth
factors. The understanding for the investment considered the growth of
economics and essential understanding of all the major fields
The analysis includes suggested FDI
patterns and the analysis of Global investment. The basis of analysis for the
issues is associated with all the major sectors in the country. The global
investment and analysis for the patterns of the United Kingdom suggest some
global trends of investment. The likelihood and environmental impact include
the prime sectors for instance financial services, food products, extractive
industries, agriculture, fisheries, and forestry. The attraction levels are
really low for the direct investment but these activities are highly significant
for the perspective of impact on the ecosystem of the country
11.
Recommendation
of Foreign direct investment
The FDI regulations of China and the
United Kingdom should be reviewed and the process must clarify as well as
simplify the process of investment for the economic benefits of China and the
United Kingdom. The activities should engage the foreigners in the regular
dialogues between China and critical issues
In order to increase the
sustainability their needs new implications for the foreign direct investment
in the United Kingdom. The government of the United Kingdom works for the
collated and the additional data. The initiatives are highly required to reduce
the issues and to increase the investment at the local and foreign stage. The progress
of investment should be against the provisional framework. The extending
condition analysis shows that the United Kingdom requires higher and sufficient
improvement in trades. The identification of all the indicators and impact of
sustainability are based on the four key sectors including biodiversity that
has specified impact
The provisional framework for the
improvement of foreign investment must consider the ongoing JNCC and work for the
identification of conservation values of different areas but the priority should
be for the economic and political links. The research ongoing JNCC work for the
biomass and bioenergy programs requires consideration. On the basis of
above-mentioned analysis and the findings, it can be recommended that the
government and business communities of China and the United Kingdom must
recognize the attractive benefits and the outward FDI for the economy of the
country. The government should express all the investment regions and should
welcome foreign investment in the country. The higher research practices should
encourage the future policies of accurate data information that can be
conducted for the performance and comparison
12.
Conclusion
on the Foreign direct investment
Based on the above analysis the state-owned
enterprises in China and the United Kingdom depends on the different
considerations. In the view of FDI, the foreign sources consider the operations
and implementation of new state-owned enterprises. The suspicion investment of
foreign companies depends on the economic growth of the country as well as
political intentions. The national security of country, technological transfer
system, labor, environment of business, employment system, standard compliances
and law, and intellectual property rights are the main factors that generate
impact on the growth of business and increase in the foreign direct investment.
The higher profitability and demand of services increases the probability of
foreign direct investment in the country. To conclude the analysis, the
increase, and rise in the global investment defines the natural outcomes and
structural transformation in the economy of China. The investment in particular
and financial flow in the industrial location needs to be considered for the
international divisions and changes in the global context. The state-owned
enterprises find more gain from the public and redistribution of income across
the world.
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