Please read "Country Focus: Foreign Direct Investment in China" (on page 247 in 7th edition and on page 223 in 8th edition). In the late 1970s, China opened its doors to foreign investors. By the mid 2000s, China attracted $65-70 billion of FDI annually. China's large population is a magnet for many companies and because high tariffs make it difficult to export to the Chinese market, firms frequently turn to foreign direct investment. However, many companies have found it difficult to conduct business in China, and in recent years investment rates have slowed. In response, the Chinese government, hoping to continue to attract foreign companies has established a number of incentives for would-be investors.
1. Consider the challenges involved with investing in China. How does China's political position and economic situation affect its ability to attract foreign direct investment?
2. Discuss China's efforts to encourage investment in its underdeveloped areas. What effect will investment have on these areas? How can firms prepare for the unique challenges of operating in these areas?