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Ratio Analysis.Doc

Introduction to the Economic Impacts Section.
• FDI brings new technologies, new management techniques
• It increasingly exposes the Chinese economy to international trade
• Since the 1980s, the enormous contribution of FDI to China‘s rapid economic development has been widely recognised.
• The most obvious contributions include relieving capital supply bottlenecks, promoting economic growth and creating employment opportunities
• FDI has also contributed significantly to government revenue , foreign trade, technological progress, and enterprise management in China
• By the end of 1996, China had attracted over 280 000 foreign investment enterprises, with a total accumulated FDI (utilised) of US$176.59 billion
• In the 8th five year plan (1991-1995), FDI accounted for about 11.8% of total fixed assets in China, which further increased to 13% in 1996.

Resource Transfer Effects

• FDI can make a positive contribution to a host economy by supplying capital, technology and management resources that would otherwise not be available and thus boost the economic growth rate
Capital
• MNEs, by virtue if their size and financial strength, have access to financial resources not available to developing-country firms
• For example in China, a sufficient amount of capital has been necessary to build-up China’s economy and FDI has made a substantial contribution to this.
• The share of FDI during 1993-1999 in Chinese domestic fixed assets investment has been around 10 per cent.
• Overall China has seen a twenty-fold increase in capital inflows from the early 1980s to 1998.
• The aggregate capital inflows into China grew steadily during the 1980s, but they have increased very rapidly since the early 1990s, which was overwhelmingly led by the large inflows of FDI.

Technological progress
• Technology can stimulate economic development and industrialisation
• Many developing countries lack the...