Chapter 11 Foreign Direct Investment and Internati...
Exercises
1.True/False questions
TTFT
2.Essay questions
(1)
International capital is the behavior of capital’s flowing internationally to seek profit.In most cases, it means a capital holder’s investing in a foreign country’s industrial or financial department and the procedure withdrawing his invest back.
It includes three main methods: International direct investment, international portfolio investment and international loan.
(2)
a.Capital flows are separated into foreign direct investment and portfolio investment.In 2000, portfolio capital flows turn negative.FDI flows remain relatively robust.
b.Private capital flows to the emerging economies have grown at a remarkable rate since 1990.
c.Though the emerging economies of East Asia attracted substantial FDI flows during the mid-1990s, they relied heavily on portfolio, bank loans and other capital flows.
(3)
The fundamental reason of capital’s international flow is the difference of rate of earnings on shareholders equity among countries.
(4)
a.It will help to improve the efficiency of global capital and the rational allocation of resources.
b.It will contribute to the improvement of global and national output and economic welfare enhancing.
c.International capital flows will lead to the redistribution of interests between different classes of the countries.
d.Help to promote the development of the global balance of payments, to promote international trade and investment is carried out smoothly.
e.Contribute to the spread of science and technology in the international community, and promote the progress of world technology.
f.For the outflow country
Get more Overseas investment income; improve current account and balance of payments; promote commodity exports; expand overseas market share; create employment opportunities
g.For the inflow country
add domestic savings; Increases the capital accumulation; introduce of foreign technology and management experience; Promote financial development; Promote competition in the domestic market, improve business efficiency; promote macro economy development
h.Negative effect
Exchange rate fluctuations and financial turmoil
Independence and efficiency of a country’s currency policy decrease
(capital inflow country)excessive capital flow into, may lead to debt crisis and other crisis
(capital outflow country)trade deficit, negative effect of job creation, domestic income and taxation
(5)
a.The rapid growth in global direct investment and the change in its pattern.
b.The concern it raises about the causes and consequences of foreign ownership.
c.The possibility offered by FDI for channeling resources to developing countries.
d.FDI is thought to play a potentially vital role in the transformation of state planned economies.