Advantages and disadvantages of foreign direct investment ——taking china for example (trial blog)

I think investment is a process of weighing the pros and cons, so I am very keen on studying the pros and cons. I learned about the benefits of international capital markets in this week's class, which triggered my thinking about foreign direct investment. During the research process, I mainly found several advantages and disadvantages flowing:

Advantages of foreign direct investment: 

It is conducive to speeding up the adjustment and optimization of domestic industrial structure. Through direct investment in foreign countries, some long-term products and industries can be transferred out, and foreign funds can be used to transform our traditional industries and improve the overall level of industrial development in our country.

           

It is beneficial to continue to deepen the reform of China's economic system. Foreign direct investment can promote foreign trade, banking, insurance, securities, commerce and other aspects of deepening institutional reform.

It is conducive to China's accession to the process of globalization of the world economy. Economic globalization is an inevitable historical trend, and economic globalization has both opportunities and severe challenges for developing countries. In order to adapt to the new situation of economic globalization, we need to better seek advantages and avoid disadvantages in the process of participating in economic globalization. Foreign direct investment is conducive to extensive cooperation between China and transnational corporations, the introduction of funds, technology and management experience of transnational corporations, the use of sales channels and networks of transnational corporations, and the expansion of exports.

Disadvantages of foreign direct investment: 

The chaos of China's foreign investment. China's market economy is still in the process of gradually opening up. Up to now, the information flow in China's market is still very closed, and there is still a lack of intuitive and reliable understanding of the specific environment of the international market. At the same time, there is no good channel for China's foreign investment, which leads to the disorder of China's foreign investment behavior. Improve the information collection and access to international information is a good way to solve this problem.

The lack of risk avoidance and prevention. Domestic investors lack timely information and comprehensive understanding of the overall trend of the international market and current events. At the same time, the relevant laws and regulations on foreign investment in China are not perfect, which leads to a large number of trade risks borne by Chinese investors in the process of foreign investment.

Lack of strategic awareness. The form of foreign investment in our country is still very chaotic, quite a lot of investors lack long-term vision and investment consciousness. Therefore, the state should strengthen its support for strategic investment behavior.

To a certain extent, China's foreign economic and trade management will be restricted by foreign market rules, and some policy provisions and enterprise behavior will not be consistent with international rules, coupled with lack of experience, lack of understanding of international rules.

Yiran Gu
Saturday  19/10/2019