Macroeconomic Factors Affecting Investment in China
Abstract
China launched its economic reforms and open door policy in 1978. A country having largest population, it attracts a pool of foreign investors towards its economy. Since then the economy went through a series of regulatory and political changes, global and domestic factors surrounded the economy, and it emerged as the second largest economy in the world registering a positive growth in its GDP consecutively for almost two decades. The economic situation prevailing globally requires the investors today to assess the opportunities across the globe and China looks to have favourable macroeconomic factors towards being a good investment opportunity.
Background of China’s Phenomenal Growth
Though China was proclaimed communist right after the 1949 revolution, it wasn’t until Deng Xiaoping came into power in 1976 that central planning was infused with capitalist thoughts and ideals. China’s modern growth truly began with Deng Xiaoping’s policies, which though way short of the Shock Therapy being advocated by Jeffery Sachs to the South American economies, was still a step towards a new form of communism – heavy state sponsored industrialization coupled with Foreign Direct Investments with a minimum of red tape. China’s vast resources along with the above policies have made it the fastest growing major economy in the world. The skewed distribution of resources has also meant that development has been concentrated along the coastal areas. China’s GDP, inflation, foreign direct investment, Currency Exchange rate, Balance of Payment (BOP) and unemployment rate are some of the macroeconomic factors that we will look into in this paper.
Foreign Direct Investment (FDI)
After the first wave of invasions by the Mongols in the 13th century, China has predominantly been a closed economy. Although its wealth surpassed that of the European cities of the Renaissance period like Venice and Vienna, it remained hidden from the rest of the world. This trend continued
China launched its economic reforms and open door policy in 1978. A country having largest population, it attracts a pool of foreign investors towards its economy. Since then the economy went through a series of regulatory and political changes, global and domestic factors surrounded the economy, and it emerged as the second largest economy in the world registering a positive growth in its GDP consecutively for almost two decades. The economic situation prevailing globally requires the investors today to assess the opportunities across the globe and China looks to have favourable macroeconomic factors towards being a good investment opportunity.
Background of China’s Phenomenal Growth
Though China was proclaimed communist right after the 1949 revolution, it wasn’t until Deng Xiaoping came into power in 1976 that central planning was infused with capitalist thoughts and ideals. China’s modern growth truly began with Deng Xiaoping’s policies, which though way short of the Shock Therapy being advocated by Jeffery Sachs to the South American economies, was still a step towards a new form of communism – heavy state sponsored industrialization coupled with Foreign Direct Investments with a minimum of red tape. China’s vast resources along with the above policies have made it the fastest growing major economy in the world. The skewed distribution of resources has also meant that development has been concentrated along the coastal areas. China’s GDP, inflation, foreign direct investment, Currency Exchange rate, Balance of Payment (BOP) and unemployment rate are some of the macroeconomic factors that we will look into in this paper.
Foreign Direct Investment (FDI)
After the first wave of invasions by the Mongols in the 13th century, China has predominantly been a closed economy. Although its wealth surpassed that of the European cities of the Renaissance period like Venice and Vienna, it remained hidden from the rest of the world. This trend continued