FDI in Real Estate of India and China Essay

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FDI in Real Estate of India and China

FDI refers to the investment made by a foreign individual or company in productive capacity of another country for example, the purchase or construction of a factory. FDI also refers to the purchase of a controlling interest in existing operations and businesses (known as mergers and acquisitions). Multinational firms seeking to tap natural resources, access lucrative or emerging markets, and keep production costs down by accessing low-wage labour pools in developing countries are FDI investors.

Foreign direct investment (FDI) is the movement of capital across national frontiers in a manner that grants the investor control over the acquired asset. Thus it is distinct from portfolio investment
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This includes the type of FDI, sector, scale, duration and location of business and secondary effects. A refocusing of perspective, from merely enhancing the availability of FDI, to the better application of FDI for sustainable objectives is crucial to push the debate forward. Various international fora and discussion have outlined a range of positive and negative aspects of FDI as a source of development for developing countries, some of which are discussed below.

1. Stimulation of national economy
FDI is thought to bring certain benefits to national economies. It can contribute to Gross Domestic Product (GDP), Gross Fixed Capital Formation (total investment in a host economy) and balance of payments. There have been empirical studies indicating a positive link between higher GDP and FDI inflows (OECD a.), however the link does not hold for all regions, e.g. over the last ten years FDI has increased in Central Europe whilst GDP has dropped. FDI can also contribute toward debt servicing repayments, stimulate export markets and produce foreign exchange revenue.
Subsidiaries of Trans-National Corporations (TNCs), which bring the vast portion of FDI, are estimated to produce around a third of total global exports. However, levels of FDI do not necessarily give any indication of the domestic gain (UNCTAD 1999). Corporate strategies e.g. protective tariffs and transfer pricing can reduce the level of corporate tax received by host
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