Foreign Direct Investment

Abstract

This chapter provides an account of systematic research undertaken into FDI in China, which highlights an overview of its source determinants and foreign development trends. It offers a summary of FDI theory in terms of the absolute advantage explanation, the theory of comparative advantages, international production, the Heckscher–Ohlin model, the product life cycle and the competitive advantages of nationals. The literature review offers a logical and comprehensive examination of a host country’s market-related factors that impact upon foreign trade, international investment and international production. China is assuming an increasingly prominent position in global economies and is projected to become one of the world’s largest recipients of FDI. In this chapter, the theory of FDI is introduced and followed by a review of the Chinese government’s investment policies and regulations together with the overall utilization of foreign trade and foreign investment.