...American Airlines Foreign Direct Investment Plan University of Phoenix June 8, 2009 American Airlines Foreign Direct Investment Plan American Airlines has decided to expand operations into the greater China market. A thorough analysis of the marketplace has taken place and the final remaining detail that needs to be defined is the airlines strategy for the foreign direct investment (FDI) that will be required to service successfully the Chinese travel market. While much of the expansion into the China market will leverage local resources, direct investment in the Chinese infrastructure will be needed. As such, the FDI analysis will focus on the expansion of airport facilities, airport and city ticket offices and a reservation center. The structure of the FDI analysis will include an executive summary of American Airlines overall China strategy, modes of entry and associated risks, funding of the initiative and contingency plan should the airline need to change strategies mid implementation. Executive Summary American Airlines and American Eagle (firms owned by AMR) serve some 250 destinations in approximately 40 countries including destinations in Europe, the Americas, and Asia-Pacific. The combined aircraft of both carriers comprise of 900 airplanes with 625 of those being jets. On any given day the airline transports 270,000 passengers on approximately 3,300 flights to over 170 destinations worldwide. Additionally, American Airlines is part...
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...I. What is Foreign direct investment Foreign direct investment as known as FDI is an investment made by a corporation or individual from other country, the foreign investor will have ownership or controlling interest in the business. “Foreign direct investment” (FDI) takes place when a corporation in one country establishes a business operation in another country” (Moran, 2012) II. Why choose this study? Since 1978 Chinese government has announced new policy of reform and opening Chinese economic, Chinese government has offered lots of new policy to attract foreign investors, different provinces have different policy but attract more foreign direct investment is a basic state policy. The government has adopted a series of policy measures...
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...INSTITUTIONS AND DEVELOPMENT By Mary M. Shirley 1 1. THE CHALLENGE OF DEVELOPMENT Developed countries are the exception, not the rule. Billions of dollars of aid and countless hours of advice notwithstanding, most countries have not been able to foster sustained growth and social progress. Increasingly research has shown that weak, Cross-country missing or perverse institutions are the roots of underdevelopment. regressions persistently demonstrate large and statistically significant correlations between institutional variables and growth, and in horse races between variables, an index of institutional quality “trumps” geography or trade as an explanation for growth (Rodrik, et al. 2002). To meet the challenge of development countries need two distinct and not necessarily complementary sets of institutions: (i) those that foster exchange by lowering transaction costs and encouraging trust, and (ii) those that influence the state to protect private property rather than expropriate it. 1 The first set of institutions includes contracts and contract enforcement mechanisms, commercial norms and rules, and habits and beliefs favoring shared values and the accumulation of human capital. Among the second set of institutions are constitutions, electoral rules, laws governing speech and education, and legal and civic norms. Today’s underdeveloped countries must acquire these institutions under particularly difficult conditions -- in a global market competing with already...
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...the effects of foreign direct investment (FDI) on the economic growth of China. Such growth was achieved through China taking in tremendous amounts in FDI, increasing its productivity, especially in the export manufacturing sector of the economy. This paper provides mounting evidence that China’s growth has been largely fuelled by FDI through capital formation, export promotion, technological and skill transfer, increased tax revenues. Similarly, the creation of a larger middle class, encouragement of economic reforms and increased infrastructure spending has fueled the inflow of FDI into China further increasing the growth of China’s economic growth. FDI plays an extraordinary and growing role in global business. Tuan, C., & Ng, L.F-Y. (2007) pointed that FDI has fuelled economic growth in China by attracting capital investments and creation of employment; increasing manufacturing exports; bringing skilled labor and international brand names and transferring knowledge and technology to local economy. FDI has improved developments in infrastructure and expanded domestic market through job creation. The fixed capital investment in economic growth has been considered one of the basic principles in economic. FDI is of special interest for its supposed positive effects on growth (Qi, 2007). In 1980, the ratio of FDI inflow to China’s Gross Domestic Investment was negligible. It had increased to 7% by 1992, and up again to 36% by 2004 (Rising FDI into China: The Facts Behind...
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...Foreign Subsidiary Investment Plan Case: Multinational Capital Budgeting China & Australia Hypothetical Incorporated MBA AF 626 Fall 2011 International Financial Management Professor XX XX XX XX XX Table of Contents PART I – Analysis: Australia vs. China A. Country Analysis 1. Economic Environment 3 2. Social Environment 10 3. Political Environment 12 B. Industry Analysis 1. Aluminum Industry in Australia 17 2. Airline Industry in China 18 PART II-Capital Budget Analysis 1. Weighted Average Cost of Capital 19 2. Net Present Value 20 3. Scenario Analysis 21 PART III – Conclusion: Investment Decision 23 References 24 Appendixes 26 PART I – Analysis: Australia vs. China A. Country Analysis I. Economic Environment Australia Australia is a market oriented financial system which includes the world’s 13th largest economy and the 9th highest per capita Gross Domestic Product (GDP), with almost two consecutive decades of growth and the unemployment rate falling to a generational low. As a result of nearly three decades of structural and policy reforms, Australian’s economy has proven to be a competitive player in the increasingly integrated global markets. In terms of country risk, Australia’s favorable attitude towards private enterprise and its well-protected property...
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... China's M&A laws allow foreign investors to restructure investments and expand their market presence Local "equity exchange centers" have been established in Beijing, Shanghai, and in Shenzhen, Guangdong Province, in some cases for specialized, high-technology deals. These centers are to serve both as sources of information on available deals and as expediters for the government approval processes. The new merger options will facilitate intracorporate restructuring. Foreign investors wishing to consolidate their Chinese investments onshore--for internal reasons or perhaps to reflect offshore developments such as a merger of parent corporations--can now do so by merging their existing FIEs. It is virtually impossible to effect a simultaneous closing of a Chinese M&A deal. Various escrow and letter-of-credit arrangements are sometimes used to bridge the gap, but the laws governing these arrangements are not well developed in China. | Gone are the days when foreign companies wishing to invest in China were limited to greenfield investments. They may now purchase operating Chinese businesses and may restructure their existing investments in China through mergers, spin-offs, and holding companies that were impossible only a few years ago. These developments are not confined to foreign investors. Domestic Chinese companies are also merging and acquiring one another, and the more successful among them have begun to buy out foreign investors. The result of all...
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...of Foreign Direct Investment in India & China !! Vivek Bhurat (MBA) # 3-4-1013/22, Flat No. 201, Vijetha Sai Mohini Apts., Barkatpura, Hyderabad - 500027. Mobile : 9000400076, E-mail : svivekbhurat@gmail.com Abstract The purpose of this article is to highlight the important determinants of FDI inflow in India & China. This article attempts to answer the question: "What are the important factors attracting FDI inflow in China then that of India?" It is concludes that market size, population, low labor cost, quality infrastructure, open policies to international trade, economic policies, tax policies, etc. are important factors of FDI inflow. Theoretically, it will fill the gap in the literature and help to the economists and investors to understand the This study aims to helps to know the future of india in terms of development in reference to Foreign Investment. The changing trends in the government & economy of india have been the indicators of development of India. The main objective of this study is to compare the flow of FDI in INDIA & CHINA and to bring the revolution in the development of india by the schemes taken by india to attract foreign investment. The crucial step in this revolution is the campaign “Make in India” an intiative by Shri Narendra Modi, Honourable Prime Minister of India. This paper also highlights the foreign direct investment (FDI) policy under the campaign “Make in India”. Introduction India & China has...
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...FDI IN CHINA DETERMINANTS OF FDI IN CHINA Shaukat Ali and Wei Guo1 ABSTRACT Why and how firms take advantage of foreign opportunities, especially via foreign direct investment (FDI) has been much documented. China, as a major emerging market, has attracted significant flows of FDI, to become the second largest receipt. This paper briefly examines the literature on FDI and focuses on likely determinants of FDI in China. It then analyses responses from 22 firms operating in China on what they see as the important motivations for them to undertake FDI. Results show that market size is a major factor for FDI especially for US firms. For local, export-orientated, Asian firms, low labor costs are the main factor. The paper concludes with managerial implications for businesses wish to exploit opportunities in China. INTRODUCTION The past few years has seen a tremendous growth of foreign direct investment (FDI) that has exceeded both world output and world trade. China is by far the largest recipient, and in 2004 surpassed the USA as host destination. It has consequently attracted an increasing attention from multinational businesses. Since China adopted the reform and opening-up policy in the late 1970s, foreign investment has played an increasingly important role in its economic growth. According to the World Investment Report for 2004 by the United Nations Conference on Trade and Development, China absorbed a total of US$53.5 billion worth of foreign direct...
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...in China October 5, 2011 Abstract The paper analyzes the advantages of Joint Ventures in China. The opening up of China’s economy to trade and foreign direct investment has been an important component in the growth of China, particularly in industry. Joint ventures in China produce advantages for the partners. China is the world’s largest and most rapidly growing developing country, it is very important to learn the advantages of Joint ventures in China. I will discuss two types of Joint Ventures and how to establish Joint Ventures (JV). Joint ventures include Equity Joint Ventures (EJV) and Contractual Joint Ventures (CJV). Then, I will introduce why foreign investors should invest in China. There are three reasons for this. And in the end, I will emphasize the advantages of joint ventures in China. There are five advantages about it, which all create benefits for partners. So China is a worthy nation to invest. Keywords: advantages, joint ventures, China, partners, invest, investment Outline Thesis： Joint ventures in China produce advantages for the partners. Because China is the world’s largest and most rapidly growing developing country, it is very important to learn the advantages of Joint ventures in China. I. Background about the development of joint ventures in China II. Two types of joint ventures A. Equity Joint Ventures (EJV) B. Contractual Joint Ventures (CJV) III. Why invest in China ...
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...Executive summary. The greenfield FDI is a form of direct investment where a parent company starts a new business in a foreign country by setting up new operational facilities. In addition to building new facilities, most parent companies also create new long-term jobs in the foreign country by hiring new employees. In order to decide which country is better for ‘greenfield’ foreign direct investment via sole ownership, the advantages and disadvantages of the countries should be considered. For example, China is a developing country, and during the past 30 years, China’s rapid economic development shows that China has a strong power in developing economic. In recent decades, China stays on one of the leading positions in direct investment and therefore a lot of investments to this country are considered to be profitable for any company or investor. The reasons are simple: the growth of the economy and a large number of different projects. Foreign direct investment in China, due to stable growth potential of the economy and a huge production resources, aimed at both the external and the internal market.The innovative ability is a great attraction for investment managers around the world. In contrast, a lot of foreign investors had chosen China for investment and this resulted in a very big competition. Nevertheless, USA is a successfully developed country. And its economy is the top one in the world. As the most important country in the first world countries, the USA...
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...China Economic Reform and Opening: Some Evidents from Guangdong Province In the late 1970s, China still a developing country three decades after a revolutionary regime change in 1949, was in dire need of systemic change. The decade-long debacle of the Cultural Revolution had just ended, leaving the economy dormant and the people physically and emotionally drained. At that time the new idea of opening the country to global contacts and influences after three decades of partly self-imposed isolation seemed a no less drastic measure to China’s leaders than the original policy of economic and social closure. Other new ideas were emerging as well. Deng Xiaoping, the chief architect of China’s openpolicy and economic reforms launched in 1978, outlined a fundamentally new approach to gradual societal change. Special zones established in 1979 and special economic zones were named in 1980. Before 1979, all the import and export products has to go to HK before enter in China. China was one of the fastest growing economies in the 1980s. The average annual growth rate of GDP for China from 1980-90 was 9.5%. The corresponding growth rate for the world as a whole was 3.1 percent (World Bank 1992, 221,. table 2). The growth rate for China in 1992 was 12.6 percent. The rapid growth in China is obviously related to its relentless pursuit of economic reform, which has unleashed productive forces previously suppressed by rigid central planning. One particularly important component of...
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...DRAFT Chinese Foreign Direct Investment in Australia: Policy Issues for the Resource Sector Peter Drysdale Crawford School of Economics and Government The Australian National University and Christopher Findlay School of Economics University of Adelaide Abstract The last nine months has seen Chinese foreign direct investment in the Australian resource sector become an issue of policy interest. There are two big questions that the prospects of a significant rise in foreign direct investment (FDI) from China into the Australian resources sector have raised. Is the surge of FDI into Australian mining and energy consistent with achieving the traditional gains from foreign investment? And are there any particular problems associated with investment from foreign state-owned enterprises or state managed sovereign wealth funds? These are among the questions addressed in this paper. The paper argues that there are no issues that cannot be dealt with under the umbrella of the established test of ‗national interest‘ in managing the growth of Chinese FDI into the Australian minerals sector. It argues that a confusion has been introduced into policy over the questions of state-ownership and supplier-buyer relations in respect of Chinese investments and that clarifying these issues is likely to be important to Australia‘s capturing the full benefits from the growth of Chinese resources demand and longer term economic and strategic interests in China. Paper for Presentation to Crawford...
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...Essay Topic: Briefly compare the political regime type in China and India. Which of the two would you prefer to do business in and why? (You may specify the type of business.) The Politic regime of a country is imposed to safeguard the interests of that country. However it can have the effect of limiting a country’s growth and development and can cause complications when attempting to do business within a country. China and India are two fast growing and very large countries with clear distinction in social and economic models as well as two very different politic regimes with their own unique characteristics. This essay will include a contrast look into the different political regimes in both China and India and the opportunities and threats of conducting business within these countries. The essay will focus on the different government regulations and control within the two nations as well as tax policy’s, intellectual property rights, and land and labour cost, concluding with which businesses would prefer potential foreign investment in each of these two nations. Political regimes as defined by (Kitschelt, 1992) are “the rules and basic political resource allocations according to which actors exercise authority by imposing and enforcing collective decisions on a bounded constituency”. The People’s Republic of China (PRC) formally a communist regime with Marxist ideologies until the economic reform in 1978 which lead them to a more modern socialism regime. The PRC operates...
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...International Trade Discuss the main determinants of FDI in China compared to Hong Kong. Is a country (or natural person investors Legal person Cross border capital investment) or other factors of production, in order to obtain or control the corresponding enterprise management right Core In order to obtain profits, or for the purpose of scarce production factors Investment activities . Main determinants of FDI in China Obviously, cheaper labour costs were the major determinant for foreign investment in China. Then, in the early 1990s, the Chinese government started to place more emphasis on technology-intensive investment. Nearly 400 of the Fortune 500 firms have invested in over 2,000 projects in China in various industries such as: computers, electronics, telecommunications equipment, pharmaceuticals, petrochemicals, power-generating equipment etc. A recent bright spot for direct investment in China has been represented by the R&D activities, with over 100 R&D centres established by transnational corporations such Microsoft, Motorola, GM, GE, Samsung, Ericson, Nokia, Panasonic, Mitsubishi, Siemens, to name only a few. According to UNCTAD sources, Motorola, for example, has established R&D centres in the area of electronics, based on US$200 million in investment and 650 research personnel. Also, Microsoft invested US$80 million in a Chinese research institute and has announced the investment of a further US$50 million to create a Microsoft Asian Technology...
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...Foreign Direct Investment (FDI) is a category of investment that reflects the objective of establishing a lasting interest by a resident enterprise in one economy in an enterprise that is resident in an economy other than that of the direct investor. The lasting interest implies the existence of a long-term relationship between the direct investor and the direct investment enterprise and a significant degree of influence on the management of the enterprise. The direct or indirect ownership of 10% or more of the voting power of an enterprise resident in one economy by an investor resident in another economy is evidence of such a relationship. FDI is measured on an asset/liability basis or on a directional basis. On an asset/liability basis, FDI statistics are organized according to whether the investment relates to an asset or a liability for the reporting country (FDI IN FIGURES, 2014). In 2008, during the financial and economic crisis which swamped the world economy in 2008 had impacts on foreign direct investment (FDI) that had become the major driver of the globalization process. The Chinese stimulus program to get the country through the global crisis was much criticized by western experts, because it was thought to extend the Chinese development model which is strongly based on exports and investments in infrastructure and favors state-owned enterprises. Yet, during the global financial and economic crisis China succeeded to remain a much favored location for inward FDI compared...
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