Dynamics of multinational enterprises (Economics) Essay - 1

Dynamics of multinational enterprises (Economics) - Essay Example China tends to favor FDI through JV route because this gives them the opportunity to boost domestic industries, post high GDP numbers and maintain a perfect competition in the economy. China as an economy has always welcomed Foreign Investments but through Joint Ventures. The report will discuss the rationale behind such policy of China and how the country has benefited with this policy along with providing market advantage to incoming companies. In the recent past FISC approach have been prevent in entering new markets and company like Kotak has used this to a full effect. The report will also analyze benefits of using the FISC approach to market entry for China and Overseas. China has favoured FDI through joint venture route because they wanted all the industries and strategies to be tightly regulated under government supervision. This can only be done if strategies are local in nature and are made by local people. These local companies have been strongly ruled and regulated by Chinese Government. The republic of China Government doesn’t want to lose this control and want it to be tightly regulated (Berger & Udell, 2002). This analysis suggests that exports level from China towards America have risen again. This is resulting in huge balance of trade payment situation towards China. With this balance of payment situation the Chinese reminibi should appreciate against US dollars. But china follow a fixed currency regime, this is done to keep Chinese export competitive. With revaluation of Chinese currency the trade deficit will not narrow US trade deficit against China. The levels would be similar but it would make Chinese exports less competitive and hence will have an indirect impact on US trade deficit (Berger & Udell, 2002). The exports that Chinese make towards are funded indirectly by Chinese government. This is done by investing in Government of USA Securities by Chinese Govt. Hence