Chinese Foreign Direct Investment
Foreign direct investment has played an important role on the industrialization process in the Brazil which china as an industrializing country needs to copy and put in place. The Brazilian government policies towards FDIs have really been of significance. There has been a fair liberal on Brazilian FDIs regime in which during this period there has been a sympathy view on foreign capital by parties and large current political majorities. They have confidently regarded this as the main source economic modernization and also employment (Dunning, Narula, 1996, p. 17).
During the 90s period, the Brazilian FDIs inflows depicted a tendency of diversification in terms of the origin country and the targeted sector of the investment. Some companies owned nationally, during that period had their investment broadened overseas. On the same regard, Brazilian is a substantial recipient of foreign direct investment. Despite the fact that Brazil is a FDIs recipient, it has no agreement effect on non-multilateral investment. The political FDIs consensus considerably have a counterpart critical wide spread ambitious view of agreements for investment.
The participation of Brazil in several networks of agreements on investment explains the Brazilian rationale position against such agreements. Foreign trade and production which are the country’s investment
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It is well known that the Brazilian development could have been more if the FDI public policies had the ability to maximize the available economic benefits. The following are some of the Brazilian FDIs policies that the Chinese government has to adopt to polish their own FDIs policies (Grub, Lin, 1991, p. 12). The Chinese government has to adopt the import substitution assimilation policy. To go on well under this policy, Brazil regulated FDI inflows on a non discriminatory basis.
Despite the widespread of tariffs on imports, there were few reservations horizontally during the investment regime and consistent sectoral restriction convection model during that time. From this point of view, the regulatory contrast was functional under the development model. The changing protected domestic market by various types of trade barriers attracted the FDI flows in Brazil. The foreign investments in Brazil were controlled by the market seeking logics of protectionist in terms of policies of trade assuring the investment profitability (Soysa, 2003, p.
56). The Brazilian government has had a quality infrastructure and labor force. For China to have foreign investors attracted it, it has to improve the environment for the business. Brazil carried out one of the successful business survey in relation to the quality of the labor. It is very vital for any government to determine if on improving the quality of labor force it can attract more foreign investors. The Brazilian infrastructure gained more strength during the 20th century in the first ten years. This included the transport and the energy sector.
This was mostly driven by growth of industrialization and urbanization. The provision of public services which was a great deal was taken by state through negotiations by the government with the foreign investors (Huang, 2003, p. 24). Brazil allowed the access of the internal market by the foreign direct investors especially by those sectors that were producing electric equipments, durable consumer goods and mechanical equipments. China can use this strategy to allow FDIs inflows as it is characterized by the above market nature.
In Brazil, the capital foreign share was actually high in the sector of industries that was characterized by technology and capital intensity. From this, there were higher levels of productivity than there before. The capital intensive was adopted in the modern technologies more than the nationally owned companies. The FDIs in Brazil participated in doing investment projects that were intermediate on the side of goods sector. For the Chinese government to have an ideal environment that can stimulate FDIs inflows, it must practice the issue of high degree of trade protection.
This factor evident in Brazil made the inefficient market structure to survive due to the absence of tough competition from well organized multinational companies. The protection gave the incoming Brazilian FDIs to concentrate on market structure resulting in high levels of productivity. It also led to transnational companies integrating vertically as a consequence of the requirements by the government towards nationalization which prevented the benefits of specialization (Ndiva, 1992, p. 29).
Additionally, for the Chinese government to practice good policies towards attracting of FDIs, it should have anti- export bias reduction in the economy. This policy evident in Brazil favored exports and together with the aggressive tax scheme and the exports incentive credits led to a deeper involvement of the transnational companies with foreign trade through the exports. The Brazilian exports diversification process was heavily contributed by these companies and above all there was a registration of dynamism in manufactured export goods. These were also subsidies and the incentives to the FDIs exporters.
The Chinese government should also ensure a stable macro- economic factors whose evidence in Brazil led to a strong domestic demand growth during the 1990s. This really attracted more transnational companies and also establishment of new investments by the already existing transnational companies (Kumar, 2000, p. 31). China should also learn from Brazil the issue of amplified incentive models in domestic markets to the new investors. The Mercosur consolidation in the Brazil industrial sector led to FDI dynamism which in the case of auto sector was considered to be as protagonist.
The regional bloc consolidation was a role that was significant in several sector processes and other sectors. On the side of the FDIs outflows, it also contributed to an important impact between Brazil and its neighbors (Pearson, 1991, p. 67). Chinese government should also carry out regulatory updates which include the suppression of monopolies by the public sectors, concessions and privatization. This in Brazil principally affected the public sector services which opened investments to the private sectors. Privatization in Brazil by late 1990s accounted for 31% of the flows by the FDIs.
For China to be on the save side, it should really stand firm on supporting industrial investments. This will include the information of new version and the auto regime. This factor in the Brazilian government attracted industrial manufacturers for new direct investment (Bora, 2002, p. 45). China should also defend its education and technological policy because these are fundamental elements that in many cases have attracted new transnational companies. In Brazil, these factors have created room for these companies to freely interact with the other domestic companies.
It also increased the positive externalities from these transnational corporations to the Brazil domestic sectors. Chinese government need to acquire measures that limit and regulates competition between the sub- national companies so as to attract FDIs which will be based on incentives. This act in Brazil prevented bidding wars and subsidies overshooting. It actually fostered foot-loose inflow of investment. Reference Bora Birijit (2002) Foreign Direct Investment: Research Issues. London, Routledge, pp. 45
Dunning John & Narula Rajneesh (1996) Foreign Direct Investment and Governments: Catalysts for Economic Restructuring. London, Routledge, pp. 17 Grub Philip & Lin Jian (1991) Foreign Direct Investment in China. Westport, CT, Quorum Books, pp. 12 Huang Yasheng (2003) Selling China: Foreign Direct Investment during the Reform Era. Cambridge, Cambridge University Press, pp. 24 Kumar Naresh (2000) Foreign Direct Investment and Technology Capabilities in the Developing Countries: A Review. International Journal of Public Administration, Vo. 20, pp. 31