Foreign Direct Investment Spillovers Sustainability

Since the turn of the new century, especially after the outbreak of the current international financial crisis, China’s fast economic development has caused rising fear and even resistance in other countries. One typical manifestation of these feelings is the rise of protectionist pressure across the global economy. These new trends will profoundly affect the ability of China to undertake its “going out” strategy in this new era.

Foreign Direct Investment Spillovers Sustainability

In the context of economic globalization, whether inflow foreign direct investment could continue to produce sustainable spillover effects in China is a big issue that is directly related to the country’s long-term development strategies and tactics. The amount of foreign capital utilized by China has currently reached very high levels. At the same time, foreign multinational companies account for a large share of the goods China exports. These conditions have given rise to a new problem for theoretical and practical research. That question is whether or not inflows of foreign direct investment can produce sustained spillover effects in China’s economic development, thereby continuing to promote improvements in the Chinese industrial structure and overall economic development. Such issues are all the more important and urgent in the wake of the Chinese entry into the WTO. After this happened, foreign-funded mergers and acquisitions happened more frequently, leading to the “crowding out” of domestic capital by foreign capital. It is thus necessary to carry out in-depth analysis and research on the factors influencing foreign direct investment spillovers. It is especially important to determine its transmission mechanism and discover a sustainable manner for producing these spillover effects. This will inevitably be a major issue for China as it becomes a strong bigger economic power.

Enhance the Management and Control of National Wealth

According to conventional economic theory, as long as a country’s people and businesses possess abundant wealth, the government need not have financial re-sources of its own. In this thinking, the financial resources of a government lie in the people and businesses of the country it rules. As long as firms and individuals have wealth, the government has the financial resources necessary for performing the state functions as a proxy. Both the 1990s Asian financial crisis and current global economic downturn show clearly that the hardest-hit countries and regions are those whose governments have no or lack adequate proxy financial resources to draw on. At the same time these countries and regions have the greatest difficulties in recovering from the crises. One key reason why Hong Kong has been able to deal with the Asian financial crisis and the current international financial crisis after its return to China is that its government has had access to and control over a sufficient amount of wealth. Viajar en asia, vuelos y hoteles Likewise, thanks to its large amount of state-owned assets, foreign exchange reserves, financial resources, and ability to control and tap into the country’s wealth, the Chinese government has been able to successfully perform its functions. Indeed, it has performed them well enough over the past three decades to help propel the sustained and rapid growth of the Chinese economy over this period.

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Rachel Gillian

Rachel is a stay at home mom with two beautiful kids. She is passionate about writing informative articles.