International Financial Management Final Essay
Final Exam Essay
Question 1:
As we can see from Exhibit 1( in comparison with Exhibit 16.1), we noticed that the during four-year period 2009-2012, the United States stays as the largest amount of FDI inflows. The other most popular destinations of FDI flows still include the countries mentioned in the textbook: the United Kingdom, France, China, Canada, Spain, and Germany. These countries still have locational advantages for FDI. And Japan plays an even smaller role in FDI inflows, with average down from 10.2 billion (2004-2008) to 2.65 billion (2009-2012). That means, Japan still has varieties of economic, legal and cultural barriers to foreign investment.
However, the component of FDI inflows changes among these popular countries, as the textbook mentioned that FDI inflows to China had dramatically increased in 2004-2008, during period of 2009 to 2012, the inflows keep increasing tremendously, and China replaced the United Kingdom as the second most popular FDI inflow just next to the United States. On the other hand, as we see from the average FDI inflows of the other popular countries, such as France, the Netherlands, Spain and the United Kingdom reduced dramatically.
I think the reason that China emerged so dramatically in FDI inflows is mainly because China has abundant low labor cost and material cost compared to other countries. The labor market of China is around 750 million people; although the average hourly wage is increasing, it is still lower than most other markets. Average workers typically earn less than $130 per month. [1] Because of that a lot of companies moved their manufactory to China. For example, IBM moved its global purchasing headquarters from New York to Shenzhen, China in 2006. It was the first time that IBM locates its headquarter outside of the United States.[1]
China’s FDI inflows fell in 2012 compared to 2011 from 123.98 billion to 121.08 billion for the first time since the Great Recession. In my opinion, the
Question 1:
As we can see from Exhibit 1( in comparison with Exhibit 16.1), we noticed that the during four-year period 2009-2012, the United States stays as the largest amount of FDI inflows. The other most popular destinations of FDI flows still include the countries mentioned in the textbook: the United Kingdom, France, China, Canada, Spain, and Germany. These countries still have locational advantages for FDI. And Japan plays an even smaller role in FDI inflows, with average down from 10.2 billion (2004-2008) to 2.65 billion (2009-2012). That means, Japan still has varieties of economic, legal and cultural barriers to foreign investment.
However, the component of FDI inflows changes among these popular countries, as the textbook mentioned that FDI inflows to China had dramatically increased in 2004-2008, during period of 2009 to 2012, the inflows keep increasing tremendously, and China replaced the United Kingdom as the second most popular FDI inflow just next to the United States. On the other hand, as we see from the average FDI inflows of the other popular countries, such as France, the Netherlands, Spain and the United Kingdom reduced dramatically.
I think the reason that China emerged so dramatically in FDI inflows is mainly because China has abundant low labor cost and material cost compared to other countries. The labor market of China is around 750 million people; although the average hourly wage is increasing, it is still lower than most other markets. Average workers typically earn less than $130 per month. [1] Because of that a lot of companies moved their manufactory to China. For example, IBM moved its global purchasing headquarters from New York to Shenzhen, China in 2006. It was the first time that IBM locates its headquarter outside of the United States.[1]
China’s FDI inflows fell in 2012 compared to 2011 from 123.98 billion to 121.08 billion for the first time since the Great Recession. In my opinion, the