根据国际货币基金组织的最新世界经济展望，预计新兴经济体将在2017的增长中看到更为糟糕的增长。由于全球经济复苏步伐缓慢，导致新兴市场经济放缓。增长前景对外国直接投资（外商直接投资）有作用。东道国对其经济活动的吸引。经济增长很快的国家会带来直接投资的快速增长。 The emerging economies are expected to see a worse growth in 2017, according to the International Monetary Fund’s latest World Economic Outlook. Due to the slow pace of the global economic recovery, it leads to an economic slowdown in emerging markets. Growth prospect has an impact on Foreign Direct Investment (FDI). The attraction of the host country to FDI bases on its economic activity. The country with a high economic growth is supposed to bring rapid growth of FDI.
There are noticeable differences between the regions. Asia’s emerging markets have continued to be performing well in attracting FDI. Thanks to the rapid recovery of economic growth, the Southeast Asia has been greatly increased while China has a slowdown in attracting FDI.
Not every region has a growth in attracting FDI. Due to geopolitical uncertainty or security issues, it is expected to result in the net outflow of FDI. Ukraine, suffers from political instability, inflow of FDI fells by a large margin of 80%. Subject to fiscal deterioration, Eastern Europe and Latin American countries have a decline for FDI. Especially, Latin America is the worst performance in attracting FDI.
The host country which has different economic and political environment brings about tremendous differences in FDI. Among all factors, economic factor should be the vital one.
To relieve a stress from slowing growth at home, companies want to search new opportunities offshore lead to FDI from emerging economies surges by a third last year. This phenomenon is not accidental, but widespread. Emerging markets, as a destination of transnational enterprises, become their formidable competitors.
But that surge was driven almost entirely by Asian investors such as China has become second only to the US in the national league tables for FDI. According to a scholar’s analysis that China’s foreign investment will increase rapidly in the next few years. Asian Infrastructure Investment Bank, which is initiated by China, would inevitably bring more investment by private enterprises.
But by other measures, capital is profit driven. The slowdown in domestic economic growth would be reducing the enthusiasm of enterprises to domestic investment. Capital always wants to seek investment opportunities abroad.
The composition of FDI has likewise changed greatly. Most of the investments made in 2017 by enterprises from developing economies were in equity while the FDI outflows from companies based in developed countries were in terms of reinvested earnings.
In a word, these changes reflect that the economic strength of the shift between different countries.
FDI flows to some countries but not others were entirely valid. The macro environment of a country can result in the direction of FDI flow. Some factors determine the flow of FDI and make it profitable. As the main vehicle, transnational enterprise plays a critical role in the flow of FDI.
At first, the economic situation is a vital factor in the host country. Market size can make the transnational enterprises realize scale economy. Transnational enterprises sell the commodity to obtain profit as the strong demand of resident. The rapid growth of the economy creates profitable opportunities and expands the domestic market to FDI. It can enhance investors’ confidences simultaneously. Economic situation influences FDI via the above routes.
What’s more, it has an important impact on FDI due to geopolitical uncertainty or security issues. The host government which has abnormal changes in the political environment such as regime and policy laws will lead to the loss to FDI. The geopolitical uncertainty will hit the zeal of FDI. For instance, Ukraine suffers from political instability that makes the inflow of FDI fells by a large margin of 80%.
The last, Labor cost is the critical factor that affects FDI. To reduce costs, transnational enterprises will choose countries with lower costs. As we all know, FDI mainly flows to developing countries lie in its low labor force.
To sum up, economic and political factor is the key that affects FDI. One spur is labor cost that maximizes transnational enterprises profits.
Why did I choose it? The flow of FDI has a broader impact on Global economic development. In recent years, the flow of FDI has changed greatly due to the impact of the international financial crisis. That huge change has transformed China from a net inflow of FDI to second only to the US in the national league tables for FDI. These changes have significant value to research which can analysis of the factors affecting FDI.
What did I learn? |
