The paper "Foreign Direct Investment in China and Brazil" is an outstanding example of finance and accounting case study. The progress made by developing countries such as China and Brazil in terms of economic growth is one of the most vivid discussions in the current century. Arguably, Foreign Direct Investment impacts the economic growth of a country positively and therefore, it is an important determinant of a country’ s economic growth. To that end, the assessment of factors which affect Foreign Direct Investment is regarded as a very important step as far as economic policies that promote economic growth is concerned.
This particular study will therefore exhaustively review the history of inflows of Foreign Direct Investment in developing countries like China and Brazil. In addition, it will also make an analysis of the trends, and patterns, perspectives of policies, growth and productivity, and distribution of sectors in China and Brazil. 1. Introduction Background and Purpose of the study According to International Monetary Fund, Foreign Direct Investment (FDI) is conventionally defined as a measure to assess a country’ s level of direct investment with regard to foreign investment (Xu, 2013, 110).
Similarly, Foreign Direct Investment is conventionally used to estimate the level of a country’ s attractiveness to potential investors. Furthermore, FDI is a cross border or rather foreign investment where an individual in a native economy exercises direct control over the management of a business enterprise in another economy. With the current trends of globalization, countries like China and Brazil have invested a lot of efforts towards the attraction of Foreign Direct Investment out of the belief that its presence helps to benefits local firms. This has also been due to the fact that the source of technological advancement for most of the developing economies is globally boosted through the initiative of FDI.
The latter is the key factor of growth in Brazil and China for several decades that have past. Based on the economic scale, FDI has tested positive for growth in the two countries and various scholars like Lee asserts that Foreign Direct Investment is a crucial tool for the transfer of technology. Henceforth, it significantly contributes to economic growth as opposed to domestic investment. According to Laura’ s study, after exhaustively analysing the aspects of Foreign Direct Investment like economic growth and financial markets, it shows that FDI plays a very important role towards the contribution of economic growth (Xu, 2013, 114).
Relatively, its role as a significant trade engine through international value chains and by the crucial need to boost the global economy by creating employment opportunities and promoting knowledge through the increment of investment flows has enhanced its relevance as a powerful tool for growth and development. To that end, China and Brazil have been internationally placed among the most dominant economies by the year 2050.
However, in 2012 China had witnessed an economic recession consequently experiencing negative effects of FDI due to it sharp decrease to 9.5 billion dollars by the end of 2012 representing the biggest slip of 7.5% as opposed to other years (Xu, 2013, 118). On the other hand, contrary to the case of China, with the Olympic games and the FIFA world cup being hosted in Brazil once after every 10 years, Foreign Direct Investment has significantly been on the increase over the years.
Notably, China’ s FDI program was prohibited in the late nineteenth century as parts of its opening up and reform policy. However, FDI has managed to perform well by positively impacting the investment environment through gradual liberalization of the restrictions. Interestingly, China has risen to become the biggest recipient of Foreign Direct Investment in the current category of developing countries with its FDI net inflows increasing from 0.3% in the late nineteenth century to 4% in 2014% as a percentage of China’ Gross Domestic Product.
Works CitedXu, Bo. "Foreign Direct Investment in Brazil and China: A Comparative Study." International Journal of Business and Management, vol. 9, no. 1, p110-180, 10 Oct. 2013.