Foreign Direct Investment in Hong Kong

Table of Contents
1.0 Introduction…………………………………..…2
2.0 Background Literature……………………........2
3.0 Research aims………………………….………...5
4.0 Methodology……….…………………………….6
4.1 Investment data………………………………6
4.2 Preferential Policies………………………….7
4.3 City Planning…………………………………8
4.4 Social System and Legal Framework……….9
5.0 Potential implications of the research……...…..9
6.0 References……………...………………………10

Foreign Direct Investment in Hong Kong

1.0 Introduction
Alongside the trend of internationalization of capital advanced, open economy has guided the way of the world trend, which not only leads all of factors of resources to blend in the development of world economy, but also promotes the development of international economics cooperation. The competition of current development of world economy naturally has a concentration on Foreign Direct Investment (FDI), accordingly, FDI plays an important role in the development of various countries’ economy. This proposal mainly mentions the research issues or questions, analysis and methodology about FDI, which can make everyone know more about the actual economic condition in England.

2.0 Background Literature
Hong Kong became a colony of the British Empire after the First Opium War. It played an essential role in the development of the British Empire economy, which exerted a subtle influence on their various areas, including finance, international trade, military, religion and historical culture. It was obvious that this colony brought science to the development of economy in Britain. In other words, Hong Kong helped Britain open the door of world trade and economy. The phenomenon implied that Focusing on FDI had become a granted fact, which was beyond doubt.

Since 1990s, the scale and flow of FDI enlarged and increased rapidly. The trend of internationalization of production became more and more obvious because of the inflating of the FDI reserve. The outflow of international FDI had increased 624 billion dollars between 1990 and 1998. In the meanwhile, the inflow of international FDI had increased 456.2 billion dollars. The speed of the growing of international FDI had caught up the speed of development of international trade and production, even surpassing obviously.#p#分頁標題#e#

In this golden period of world economic development, Hong Kong was the bridge of international trade and economics between China and Britain. An increasing number of corporations in Britain set out to make Hong Kong become an essential target market, which could make more and more profits for capitalists. Multinational corporations had found it impossible to resist the temptation to merge with other corporations. Especially in international trade, it showed quite a few capitalists’ ambition, which was the power of promoting world economy.

In the past 20 years, a lot of multinational corporations blended in the new international market. However, as the new economic hot wave in USA and 911 broke out, which led the development of world economy to slow down. These disadvantages prevented the FDI from increasing. In the meanwhile, the reversal turned up. A large number of Multinational corporations were determined to decrease the merging, because the market prospect made the capitalists get into trouble. The phenomenon was so obvious in Hong Kong, which gave a rise to the unemployment and the condition of living.

Currently, world economy still stays in the period of economic recovery, so various countries exists some crucial factors, which would have an impact on FDI. Such as, oil price, investment strategy, antitrust power, international capital and so on. Hong Kong was specialized in manufacturing, but there was no doubt that the advantage of manufacturing was not obvious. According to various countries’ strategy, Hong Kong has changed its trend of development and has become to be a trading area. In other words, Hong Kong is a medium, which promotes international trade and economics. Britain crosses conventional boundaries and breaks patterns to found some corporations in Hong Kong. A lot of corporations rise to frame swiftly, which attracts more and more enterprises to invest in Hong Kong. Consequently, FDI in Hong Kong revealed an increasing trend rapidly.

International antitrust organization is always focused by various countries, because it can influence the multinational corporations’ merging behavior. Alongside the international trade advanced, capitalists try to make more profits, so they take an option that multinational corporations cooperate and attempt to monopolize the market. To varying degrees, the kind of behavior is not fair to some new corporations. Although international antitrust organization ought to retrain the increasing of FDI in Hong Kong, it is necessary to keep the balance between big corporations and small companies. Nowadays, various countries take some serious measures to make sure that international trade and economics can develop step by step. As the trend of development, it is necessary to do a research about FDI in Hong Kong.

3.0 Research Aims
Through doing a research about FDI in Hong Kong, everyone should find out more and more factors of restraining FDI development and the reason that FDI increases rapidly. After that, decision-makers of corporations will combine all of factors into consideration. They will set down some strategies, which depend on different situations. According to different situations, everyone will decide to use a strategy and try to observe and estimate the consequence. After making a close study, we can find why FDI increases so rapidly in Hong Kong. In the meanwhile, the research can warn decision-makers to be more cautious and tell them to acknowledge the investment again.#p#分頁標題#e#

4.0 Methodology
Hong Kong crosses conventional boundaries and breaks patterns to practice the new mode of economy, which is export-oriented economy. In this kind of condition, it is beneficial for Britain to cooperate with Hong Kong. There is no doubt that this measure can promote International Economics Cooperation, sequentially, the research should include some information about import and export trade, which should be some relevant data.

4.1 Investment data
Firstly, Britain has invested some items in Hong Kong, which mainly include insurance, finance, accounting, entertainment industry, medical services, import and export trade and so on. Hong Kong retained its position as Asia's second largest destination for FDI, according to the "World Investment Report 2007," released by the United Nations Conference on Trade and Development (UNCTAD) in October. As Meltiz’s saying goes,’ Focusing on different areas’ variable quantity of investment is a sticking point that investors and capitalists can be wise to make a better decision of investment and know more about international trade.’ The quotation makes sense that it guides the way to do the research, so it is so necessary to analyze and compare the data of the growth of British investment in Hong Kong. The areas include insurance, finance, accounting, entertainment industry, medical services, import and export trade. The timeline is from 2007 to 2009.
The growth of British investment in Hong Kong

According to the graph, everyone can know something about the growth of British investment that entertainment industry, finance, accounting and import and export trade reveal the growing trend, especially finance and import and export trade.

4.2 Preferential Policies
Secondly, why does the data of the growth of British investment reveal the growing trend? There is no doubt that the policy plays a crucial role in international investment. The government takes a measure that Hong Kong has preferential policies for foreign owned enterprises, which can attract an increasing number of foreign owned enterprises to open up the market in Hong Kong, even Chinese mainland. Not only do preferential policies attract a growing number of foreign owned enterprises, but tax breaks also appeal a lot of foreign owned enterprises to enter the Hong Kong market. The percentage of tax breaking depends on different commodities. However, the percentage of tax decreasing is lower than other areas at least 4%, accordingly, Hong Kong is called the Golden Heaven by a lot of investors and capitalists

4.3 City Planning
Thirdly, the research should mention that city planning is an essential factor in study FDI in Hong Kong. There is no denying that city planning in Hong Kong is beneficial for a great part of foreign owned enterprises, especially Britain. Britain is the earliest Industrial Empire all over the world. At present, Britain has a concentration on protecting the environment and rebuilding the recycling public establishment, so Hong Kong compartmentalizes industrial area, which can attract a lot of industrial countries to enter the Hong Kong market. This measure can assist various countries on saving cost, consequently, it is their pleasure to migrate their factories into Hong Kong. It brings about the growing of FDI in Hong Kong rapidly.#p#分頁標題#e#

4.4 Social System and Legal Framework
Last but not least, the research also should take the social system and laws into consideration, because it will influence the international cooperation. Hong Kong’s social system and legal framework are almost as same as the Britain. Hong Kong has a democratic social system, which is good for international communication. Legal framework can protect foreign owned enterprises, which can get rid of being damaged by local power and make the cooperation be in progress feasibly. Apparently, social system and legal framework are the guards of foreign owned enterprises, but it is the basic of attracting foreign investment. It is necessary to do some research on social system and legal framework.

5.0 Potential implications of the research
The research mainly has two potential implications, which includes the academic implications and the practical implications. Firstly, through doing a research on FDI in Hong Kong, everyone can find out a lot of factors, which influence the investment on FDI. Doing this kind of research can cultivate the ability of masters’ analysis. Secondly, quite a few masters will become decision-makers of corporations in the future, so the research can warn them to pay attention to the factors of influencing investment. It is necessary for investors to know more about international trade and FDI, because it can reduce the risk of failure of investing.

6.0 References
Journal of International Economics Volume 32 Issues 1-2, February 1992, Pages 109-129

Helpman, E., M. J. Melitz, and S. R. Yeaple (2004): "Export Versus FDI with Heterogeneous Firms" AER, vol. 94, 300-317

Helpman, E. (2005): “Trade, FDI and the Organization of Firms” Pages 120-189

Kortum, S., J. Eaton and F. Kramarz (2004)"Dissecting Trade: Firms, Industries, and Export Destinations", American Economic Review Papers and Proceedings, 94, 150-154

Melitz, M. (2003): “The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity”, Econometrica Volume 71 Issue 6, p. 1695