China and Monetary Policy Coursework Example | Topics and Well Written Essays - 10000 words

China and Monetary Policy - Coursework ExampleForeign projects in manufacturing sectors were only concentrated in labor-intensive sectors, such as food, electronics, construction materials, textiles and toys. In the late 1980s, foreign manufacturing investment accounted for more(prenominal) than 70 percent of the total FDI flowing into China investment continued to emergence rapidly, reaching more than 80 percent around 1990 (NBS, 1991). With increasing experience in the Chinese market, and accumulated knowledge about Chinas industrial structure, foreign firms extended their pipeline scope into physical infrastructure facilities, including construction, energy, transportation and capital-intensive and technology-intensive machinery and equipment. Such investments involved more technological inputs, higher start-up costs, and larger financial commitments and, therefore, foreign firms faced greater risks. With Chinas accession to the WTO, other sectors, particularly services, grav el become popular to foreign investors.In China, FDI is highly agglomerated. It favors cities where targeted industries are fairly developed (Belderbos and Carree, 2002). marshal (1898) proposes that the pool of specialized skilled labor, trade of intermediate inputs, and spillovers were driving forces of industrial agglomeration. Porter (2000) argues that industrial clusters increase the productivity of constituent firms, upgrade the capacity of cluster participants for innovation and productivity growth, and stimulate new pedigree formation. Because of the lack of local knowledge, foreign investors encountered so-called disadvantage of an alien status in China. Industrial clusters have helped foreign investors to attenuate these disadvantages (He, 2002, pp.1030). Therefore, foreign investors like to select geographically agglomerated industries with strong localized business linkages. Traditional FDI theories (Hymer, 1976 Kojima, 1978 Dunning, 1980) suggest that industrial distr ibution of foreign investment depends on comparative advantages in horde economies and the ownership-specific advantages that multinational corporations (MNCs) hold. Dunning (2000) argues that factors influencing MNC industrial choices have gone beyond the natural endowments in the era of globalization, and that benefits from industrial agglomeration are playing an increasingly important role. Therefore, industrial distribution of FDI in host economies might be influenced by industry-specific external economies, which arise from geographical proximity of related firms and localized business linkages. There is some make literature concerning industrial patterns of FDI in host economies. Caves (1974), for instance, considers foreign firms shares in Canadian and UK manufacturing industries in the 1960s and emphasizes the greatness of intangible capital, advantages accruing from the operation of multiplant enterprises and the strength of entrepreneurial resources. Ratnayake (1993) co ncludes that foreign ownership of industry tends to be higher in skill-intensive and technology-intensive industries and those in industries enjoying high-level protection in Australia. Aswicahyono and Hill (1994) examine determinants of foreign investment shares in the Indonesian manufacturing sector and find product differentiation, technological capacity, skill intensity, absolute capital