The article that I read was about FDI in China and how over
recent months the United States FDI has increased in China although the economy
had shown slower growth. China has an increased FDI of 7.1% from the same time
in 2012. The current FDI total in only seven months is $71.4 billion. This July
China received $9.4 billion in FDI, nearly a 25% increase from one year ago.
Looking at the overall FDI it can bee seen that the FDI in manufacturing has
fallen 2.4% in a year versus the FDI in the service sector that has risen
15.8%. According to the article China is looking to attain more FDI in advanced
manufacturing to process higher value products. Since this economic shift,
China’s economic growth has slowed from 7.7% to 7.5%.
What I first found interesting is that globally there has
been a recent shift from manufacturing to service goods. By looking at this
through the specific factors model, it might be seen, that China is a
manufacturing abundant country versus a labor abundant country. Since there has
been a shift to more labor intensive FDI, this might explain China’s economic
dip. It also will be interesting to see if more China attains more immigrants
to operate more advanced technology.
My questions would be: Do you think an increase in
immigrants to China is likely, if so what effect might it have? Also, what
might this shift from manufacturing FDI to service FDI tell us about the global
economy?
First of all we should understand that, all the US Companies that have a FDI in China move there because of the large population and little bit of technology. In this way, China because the source of cheap labor for the investors. Moreover, as we saw in the previous chapters about capital and labor abundant when two factors are considered, we see that China is an labor abundant. So, with the FDI, China has something to offer to the Companies that invest in China. And with the low of technology, and with the labor abundant factor, the coming of other people in the Country will make worse the economy of China by affecting the labor sector which depended on the low skilled duties in the labor abundant. This is because, when FDI is high in China, then the shift of Immigrants from the foreign country come to take the chances of the low skilled labor of the labor abundant country which now is transformed or is being transformed into capital factor by the FDI. This immigration will be possible because of the FDI bringing in the new people to work in the capital abundant(Movement of capital factor).
ReplyDeleteIn short, this will affect the economy of China's economy because most of the people will loose their jobs in labor abundant when the economy is adjusting itself in the manufacturing sector. On the other hand, the immigrants who were less skilled in the manufacturing industry who moved in China, will have a high pay compared to when they were home, so both home and foreign workers their wages will be high hence stimulating the economy.
On the side of shifting from manufacturing FDI to service FDI, the global economy might be affected because all the services done will replace the capital FDI of which most of immigrants who are in the manufacturing industry will loose jobs, will decrease their wages and generally causing the global economy to be unbalanced.
I do not think an increase in immigrants to China is likely. China has established even harsher laws companies and business owners who hires illegal immigrants. Fines are between 5,000 yuan to 20,000 yuan for illegal immigrants, and employers are fine about 100,000 yuan per individual if they are caught doing that.
ReplyDeleteIf an increase in immigrants happens to China, these immigration will affect the growth of China's economy because there might be a higher unemployment when the China tries itself to develop new technology in the manufacturing sector. Besides, the decrease of China's GDP in third quarter is due to the low domestically demand of consumption and investment, I consider that the new FDI will help China's economy get out of the recession in the long run.
ReplyDelete