2. Literature Review. 2.1 Introduction. The Literature

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2. Literature Review
2.1 Introduction
The literature review of this research will contain different elements in order to give a full in depth review into the Chinese automobile industry’s development and the Volkswagen Group (VW) in particular. The role of Government and the Open Door Policy, foreign direct investment (FDI) from VW, Resource-based Theory are the main issues that will be discussed in the following chapter. I have chosen these elements because they are essentials factors to the Chinese automobile industry. Regarding the role of the government, the government has been heavily influential in the development of the automobile industry all around the world (Zhaotao, 2015). Good examples of Asian government manipulating the …show more content…

2.2 The role of the Government and Open Door Policy
Deng Xiaoping set in prepare the change of China 's economy when he declared a new Open Door Policy in December 1978. Mr. Deng understood that China required Western technology, innovation and investment, therefore he opened the path for outside organisations who needed to set up in China (, n.d.). At first, four Special Economic Zones (SEZs) were farmed in South China with tax incentives to draw in outside speculation into the nation.

As the nation is a developing economy, the government has to play a critical role to guide and control the nation (Nove and Gerschenkron, 1963). For instance, the part of government in enhancing general financial and social welfare ought not be expelled or belittled, even in developed, mature economies (Reich, 1989). Developing markets are countries that are investing in more productive capacity. They are moving far from their conventional economies that have depended on agribusiness and the export of raw materials. Leaders of developing countries want to create a better quality of life for the citizens. Subsequently, they are rapidly industrialising and embracing a free market or mixed economy (Amadeo, 2016). Developing economies frequently seek to restructure their economies along market-oriented lines and offer a wealth of opportunities in trade, technology transfers, and FDI (Heakal, 2015). Emerging markets are important because they drive growth in the

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