Econ0602-Lecture-4 new

Econ0602-Lecture-4 new - Decision Tree ECON 0602: Lecture 4...

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1 1 ECON 0602: Lecture 4 FDI in China: A General Picture HKU ECON 0602 ® Larry Qiu 2/85 Go to China? Guidance Yes No Export FDI License Entry Modes Location EJV CJV WFOE Partnership Relation with government Management M&A Distribution Strategy Barriers Why? Market and industry analysis How? Theories Policies, regulations, pros and cons How to solve the problems Data to see the macro pictures and past experiences Cases to see the microstructures and problems Survey to ask specific questions and seek answers Action Methodology Decision Tree HKU ECON 0602 ® Larry Qiu 3/85 Outline ± What is FDI in China? ± Definition ± Three modes ± FDI incentives and inflows to China ± A set of questions about FDI in China HKU ECON 0602 ® Larry Qiu 4/85 A General Discussion ± How do you define foreign direct investment (FDI)? ± A general definition of FDI ± FDI in a ( host ) country is all business organizations in which a foreign ( source , home ) country's person, organization, or affiliated group owns an interest of 10 percent or more. HKU ECON 0602 ® Larry Qiu 5/85 FDI occurs when an investor based in one country (home) acquires an asset in another country (host) with the intent to manage that asset . The management dimension is what distinguishes FDI from portfolio investment in foreign stocks, bonds and other financial instruments. In most instances, both the investor and the asset it manages abroad are business firms. HKU ECON 0602 ® Larry Qiu 6/85 ± In such cases, the investor is typically referred to as the “ parent firm ” and the asset as the “ affiliate ”or subsidiary ”. ± The major category of FDI is equity capital , which is the value of the MNC’s investment in shares of an enterprise in a foreign country. ± FDI includes both mergers and acquisitions and greenfield ” investments (the creation of new facilities). ± Portfolio investment .
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2 HKU ECON 0602 ® Larry Qiu 7/85 FDI Definition in China Equity Joint Venture (EJV) (Joint-venture enterprise) Contractual Joint Venture (CJV) (Cooperative operation enterprise) Wholly Foreign Owned Enterprise (WFOE) (Foreign investment enterprise) They are all called FIEs (foreign invested enterprises) or FFEs (foreign funded enterprises). HKU ECON 0602 ® Larry Qiu 8/85 Modes of FDI ± Wholly foreign owned ± Little at the beginning, increasing later, dominating now ± Equity joint venture ± Little at the beginning, dominating later, declining now ± Contractual joint venture ± Dominating at the beginning, declining later, little now HKU ECON 0602 ® Larry Qiu 9/85 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Equit Joint Venture Contractural JV Wholly Foreign Owned Foreign Investment Share Enterprises Joint Development Projects Modes of FDI in China HKU ECON 0602 ® Larry Qiu 10/85 Back HKU ECON 0602 ® Larry Qiu 11/85 Outline ± What is FDI in China?
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This note was uploaded on 09/06/2010 for the course ECON ECON0602 taught by Professor Qiu during the Fall '09 term at HKU.

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Econ0602-Lecture-4 new - Decision Tree ECON 0602: Lecture 4...

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