International flexible investment and its influence

The theory of international direct investment and its far-reaching influence on China's foreign investment

Abstract: With the continuous development of economic globalization, international direct investment, as an important way of international economic and technological cooperation, is also developing. International direct investment is conducive to promoting international division of labor and cooperation and global economic development. Since the reform and opening up in China, the comprehensive national strength has been continuously enhanced, and the competition among enterprises has been intensified, which is deeply influenced by international direct investment. This paper focuses on some basic practices of international direct investment and a series of far-reaching impacts on China, including the characteristics, motives, investment environment and significance of international direct investment to China's foreign investment.

Keywords: international direct investment theory; Characteristics of direct investment; Motivation of direct investment; Investment environment; The far-reaching influence of direct investment on China's foreign investment

International direct investment refers to the investment behavior that a natural person, legal person or other investor of a country establishes, expands or acquires enterprises in other countries outside the country for production or operation, and has effective management control.

First, the characteristics of international direct investment

Since World War II, the rapid development of international direct investment has made it the most important way of international investment. Most notably, from the 1970s to the present, its characteristics are mainly reflected in the following aspects:

1. In the international direct investment activities, the investor's equity in the enterprise is consistent with its management control right, and its controlling right is directly proportional to its control right. The enterprise is founded by a single investor, and the ownership of the enterprise is held by the investor, who holds all the business control rights of the enterprise; Where an established enterprise is jointly funded by two or more investors, the division of business control rights of the enterprise shall be determined according to the amount of capital contribution. However, due to the different ownership structure and organizational form of each enterprise, the proportion of shares needed to obtain effective management control is also different.

2. At present, there is no uniform standard for the minimum equity ratio required for international direct investment. In the Balance of Payments Manual published by the International Monetary Fund, it is pointed out that owning 25% or more of the equity of the invested enterprise can be used as a reasonable standard to control the right to operate. The laws or relevant regulations of many countries also stipulate the minimum proportion of equity required for direct investment. Different investment forms are different, but the specific explanations and standards of different countries are also different. For example, the foreign direct investment referred to in Japan's Foreign Exchange Control Law includes more than 65,438+00% ownership investment made by domestic investors in overseas enterprises, and the loans or contributions provided to enterprises are less than 65,438+00%, but at the same time they maintain a long-term and sustained relationship with enterprises through non-equity forms.

3. International direct investment is fundamentally different from international indirect investment through securities. Direct investment is a kind of commercial investment. No matter which industry investors invest in, it has always been determined as a prerequisite to obtain the operational control of the enterprise; However, international indirect investment is an act of obtaining overseas securities for the purpose of obtaining certain profits, and there is generally no problem in obtaining the right to operate enterprises. The basic difference between them lies in whether they have the ownership of enterprise management.

Second, the motivation of international direct investment.

1. The foreign direct investment made by an enterprise to realize its global development strategy and achieve the best operating results. Global development strategy is the business strategy of global expansion of multinational companies, and the global strategic motivation is the embodiment of the development of international investment to a higher level.

2. Foreign investment in the development and utilization of overseas natural resources such as oil and mineral products, forestry and aquatic products has always played an important role in international direct investment, because the development of natural resources can only be invested where there are natural resources.

3. Enterprises use overseas cheap labor, land and other resources to reduce their comprehensive production costs and maintain or improve their competitiveness for investment. From the perspective of enterprise management strategy, this kind of investment is mostly for the needs of defensive competition, so it is not an offensive investment motive. In international management, the flow of labor force is restricted by many aspects, while land will not flow. Therefore, if investors want to make use of cheap foreign resources, they must adopt the way of direct investment and directly use low-cost investment to improve the operating effect of enterprises. This motivation exists not only in the foreign direct investment of developed countries, but also in the foreign direct investment of developing countries and regions.

Third, the international direct investment environment analysis

International direct investment environment refers to the synthesis of various external situations and conditions that can affect international investment activities. Political, economic, social and cultural differences among countries make foreign investors face many uncertainties. Among all types and degrees of risks, investors are most concerned about the risks that affect investment safety. Therefore, overseas enterprises' understanding and analysis of the investment environment begins with general political risks and then extends to various external conditions that may affect investment and business activities. The investment environment includes not only political, legal and economic aspects, but also social, cultural, natural and geographical aspects, which will affect the international direct investment environment to varying degrees.

Fourth, the far-reaching impact of international direct investment on China's foreign investment.

The utilization of foreign capital and foreign investment in China is a cause developed under the guidance of the reform and opening-up policy. Its basic purpose is to develop and expand foreign economic and technological cooperation and exchanges, promote China's economic and social development, improve the level of science and technology, and strengthen socialist modernization. By utilizing foreign capital and foreign investment, China can give full play to its advantages in natural and economic conditions, improve its comprehensive national strength and international competitiveness, and at the same time, it can make more effective use of various resources of other countries, introduce capital, advanced technology and management experience from other countries, drive commodity exports and open up international markets.

1. Direct utilization of foreign capital refers to the introduction of foreign capital by absorbing foreign direct investment. Its specific forms are: (1) Sino-foreign joint venture; (2) Chinese-foreign cooperative enterprises; (3) Wholly foreign-owned enterprises; (4) Sino-foreign cooperative development.

2. Indirect use of foreign capital mainly refers to the use of overseas loans and international guarantee financing, with the specific forms as follows: (1) commercial bank loans; (2) international security financing, including overseas listing of enterprises and international bond financing.

3. Flexible use of foreign capital is a reasonable arrangement made by Chinese and foreign parties on the basis of cooperative production or service enterprise contracts. The specific forms are: (1) compensation trade; (2) External processing and assembly, including processing with supplied materials and assembling with supplied parts.

References:

[1] Wang Kuncheng, Zhu Jianhua. Reflections on international direct investment [J]. Journal of Dongbei University of Finance and Economics, 2003( 1 1).

[2] Liang Dong. Understanding of western investment practice and the choice of China's investment strategy [J]. Contemporary Finance and Economics, 2002(05).

[3] Qi Xiaohua. Theory of foreign direct investment and its research in China [J]. Economic Jingwei, 2004(0 1).

[4] Zhu Zhu. A Summary of China's Foreign Direct Investment [J]. Economic Outlook, 08, 2002.

Source: Shopping Center Modernization, 2065438+27, 2004.

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