Why TO invest in China?
There are several reasons for a given company not to invest in a foreign country, i.e. inadequate domestic market, economic system, government policy, infrastructure, supply of skilled labour, and so on. Therefore, very often the location advantages of a country are simply too few to attract foreign investors.
However, this rule clearly does not apply to the Chinese case. What makes China such a desired place for foreign investments?
1. Relocation overseas to Third World production sites is often the result of rising domestic costs (especially wages costs). This factor is crucially important for export oriented FDI. Currency appreciation together with higher levels of rents and labour costs in the home country can cause a loss of international competitiveness, and China’s labour intensive market compensates that.
2. Taxation reasons. China encourages special incentives of low taxes and subsidized infrastructure. China has signed a tax treaty with a few countries in order to avoid double taxation. In addition, a preferential taxation policy is applicable for investment in China’s development zones.
3. Availability of locally established component suppliers is extremely important for foreign investors. China is very experienced in manufacturing, hence finding suitable local suppliers and establishing links with these entities is relatively simple compare to other Third World Countries.
4. There is an existing and growing domestic market in China.
5. China’s political and social situation is very stable.
In conclusion, despite the cautious approach of multi national companies to undertake business ventures and inflow of FDI in China, the motivations and reasons to invest in China are of a great number, and foreign companies are now moving ahead at full steam to capitalize on China’s fast growing market and more investor friendly environment.
Apr 9, 2008
Science and Technology vs Agricalture in China
Science and technology are the only solution for the solemn problems faced by the agricultural sector in China- prospects for foreign investors
By Yael Trau
Agriculture occupies a vital place in China, and has an imperative role, both in economic provisos and in social-political provisos.
The economic role of agriculture is illustrated, predominantly, at being the key tool for the implementation of the food security plan. Furthermore, the agricultural sector is an enormous employment device, responsible for the employing of estimated 350 million farmers, by far the biggest sector in China. In addition, although in the developed world agriculture accounts for a fairly low proportion of the GDP: in 2002, Japan’s agricultural sector was only 1.4 per cent of its GDP and 5 per cent of employment, and in the United States it was 2 per cent of GDP and 2 per cent of employment, in China, in the year of 2003, agriculture accounted for 13 per cent of GDP and 40 per cent of all employment. Its economic role, thus, is fundamental.
The social political significance of agriculture in China, at the beginning of the 21st century, is based upon two main levels. On the symbolic level this sector is likely to best tie the communist ethos accompanied with the PRC heritage, to its present market orientated policy (“Socialist open market”). On the practical surface, due to its vast scope, i.e. 60 per cent of the Chinese population is regarded as rural; and over 40 per cent directly employed in the sector, agriculture is in actual fact a condition to stability. It is a well-believed perception amongst the leadership of China that the farmers of China still hold the keys to stability in modern China, even and perhaps more than ever under the open door policy and reforms. It is therefore indisputable that the statement adopted in 1961 “Agriculture is the foundation of the economy”, is indeed still valid.
Nevertheless its unambiguous importance, the agricultural sector in China is facing immense obstacles in the process of fulfilling its economic and social roles. The main obstacles and limitations for the agricultural sector in China are both on the macroeconomic level i.e. national problems (natural disasters for example) and on the microeconomic level – the farm unit. In general, the farms in China are very small; they suffer from lack of technology, limited access to innovations and improvements in the sector, and limited access to further professional training. In addition, farmers’ incomes are extremely low.
Deng Xiaoping always stressed the prominent of science and technology in the development of agriculture. He said,”The development of agriculture depends first on policy, and second on science. There is no limit to developments in science and technology or to the role that they can play…in the end it may be that science will provide a solution to our agricultural problems”.
Deng’s argument has been a basic guideline behind China’s agricultural modernization and construction. Moreover, the idea that science and technology are primary productive forces was used in the first time in the agricultural context. The implications of that were an emphasis on agricultural scientific research, and education, in order to enhance the scientific quality of farmers and raise the quality of agricultural scientific and technological equipment, adapting it to the needs of farm modernization.
Accordingly, China’s new policy under the open door policy and reforms, which was coordinated with price, market and industry structural policies such as the household responsibility system, development of industry in rural areas and focus on agricultural research and education, has indeed led to great leaps in productivity and efficiency.
In conclusion, the importance of science and technology in the agricultural sector is undoubtedly evident, resulting in new challenges faced by the Chinese government. Hence, to meet the new demand for education and technology in the agricultural sector, the Chinese government adopted the technology transfer tool, which was already heavily used in the industrial sector.
This is in fact, an open invitation issued by the Chinese government for foreign investors, to enter the Chinese market with maximum governmental assistance and cooperation, as long as they contribute to the technology improvement of the agricultural sector in China.
http://www.helios-developments.com/
By Yael Trau
Agriculture occupies a vital place in China, and has an imperative role, both in economic provisos and in social-political provisos.
The economic role of agriculture is illustrated, predominantly, at being the key tool for the implementation of the food security plan. Furthermore, the agricultural sector is an enormous employment device, responsible for the employing of estimated 350 million farmers, by far the biggest sector in China. In addition, although in the developed world agriculture accounts for a fairly low proportion of the GDP: in 2002, Japan’s agricultural sector was only 1.4 per cent of its GDP and 5 per cent of employment, and in the United States it was 2 per cent of GDP and 2 per cent of employment, in China, in the year of 2003, agriculture accounted for 13 per cent of GDP and 40 per cent of all employment. Its economic role, thus, is fundamental.
The social political significance of agriculture in China, at the beginning of the 21st century, is based upon two main levels. On the symbolic level this sector is likely to best tie the communist ethos accompanied with the PRC heritage, to its present market orientated policy (“Socialist open market”). On the practical surface, due to its vast scope, i.e. 60 per cent of the Chinese population is regarded as rural; and over 40 per cent directly employed in the sector, agriculture is in actual fact a condition to stability. It is a well-believed perception amongst the leadership of China that the farmers of China still hold the keys to stability in modern China, even and perhaps more than ever under the open door policy and reforms. It is therefore indisputable that the statement adopted in 1961 “Agriculture is the foundation of the economy”, is indeed still valid.
Nevertheless its unambiguous importance, the agricultural sector in China is facing immense obstacles in the process of fulfilling its economic and social roles. The main obstacles and limitations for the agricultural sector in China are both on the macroeconomic level i.e. national problems (natural disasters for example) and on the microeconomic level – the farm unit. In general, the farms in China are very small; they suffer from lack of technology, limited access to innovations and improvements in the sector, and limited access to further professional training. In addition, farmers’ incomes are extremely low.
Deng Xiaoping always stressed the prominent of science and technology in the development of agriculture. He said,”The development of agriculture depends first on policy, and second on science. There is no limit to developments in science and technology or to the role that they can play…in the end it may be that science will provide a solution to our agricultural problems”.
Deng’s argument has been a basic guideline behind China’s agricultural modernization and construction. Moreover, the idea that science and technology are primary productive forces was used in the first time in the agricultural context. The implications of that were an emphasis on agricultural scientific research, and education, in order to enhance the scientific quality of farmers and raise the quality of agricultural scientific and technological equipment, adapting it to the needs of farm modernization.
Accordingly, China’s new policy under the open door policy and reforms, which was coordinated with price, market and industry structural policies such as the household responsibility system, development of industry in rural areas and focus on agricultural research and education, has indeed led to great leaps in productivity and efficiency.
In conclusion, the importance of science and technology in the agricultural sector is undoubtedly evident, resulting in new challenges faced by the Chinese government. Hence, to meet the new demand for education and technology in the agricultural sector, the Chinese government adopted the technology transfer tool, which was already heavily used in the industrial sector.
This is in fact, an open invitation issued by the Chinese government for foreign investors, to enter the Chinese market with maximum governmental assistance and cooperation, as long as they contribute to the technology improvement of the agricultural sector in China.
http://www.helios-developments.com/
Subscribe to:
Posts (Atom)