International Business - Foreign Direct Investment Essay

International Business - Foreign Direct Investment - Essay Example China still holds and implements its policy that discourages or sometimes bans wholly foreign-owned investment. Certain intangible aspects have been recommended for foreign investors to put into consideration in order to run a successful joint venture in China. These aspects are culture, common sense, law and understanding of finance which jointly complement each other in China business environment. Throughout the 1980s up to mid-1990s, Chinese government oversaw inbound FDI mainly through entry intervention where the government emphasized FDI project ratification in which the government was able to manipulate and influence FDI size, location, timing and sometimes partner selection. China way of dealing with foreigners which is partly contributed by the country’s culture and government policy largely exhibited lack of experience in dealing with most MNCs hence most of these corporations remained regulated (Grosse p.297). The concerns of China’s government during this pe riod largely came to reflect regulation tendencies as to which industries should be opened to foreign investors and where FDI should be channeled to. Most enacted laws and regulations did not grant MNCs total control and operation powers instead these laws, rules and regulations became to be associated with how to control foreign company entry into the nation’s market (Grosse p.297). Carrying out research in 1993 Erramilli and Rao noted that joint venture as a preferred entry mode by MNCs become successful when the cultural space is relatively large between the host and home countries. Further the authors found out that there exist relationship between joint venture entry mode with â€Å"the level of the host country wellbeing, the level of host government restrictions, and the level of competition in the host country† (cited in Jiang, Cristodoulou and Wei par.3 ). At the same time literature postulate that MNCs entry mode decisions is largely affected and influenced b y the host country’s investment policies. The popularity of joint ventures in China has been attached to numerous reasons with popular one being â€Å"direct or indirect government rules requiring them in a certain circumstances to do so† (Jiang, Cristodoulou and Wei par.3). Further joint ventures (JVs) in this country have resulted due to popular and widely held belief that JVs are likely to work with Chinese municipal governments well without much conflicts.