Potential and Opportunity for Foreign Direct Investment in China

International Business Across Chinese Border Heightened global interdependence characterizes Today's economic world. Currently, the world is experiencing an unprecedented degree of cross-border economic and capital interdependence, both with developed and developing economies. The global economic system has dramatically transformed; we are experiencing power being transferred to new players. India and China have become two stars of global interconnectivity and economic expansion. In fact, just recently, the government of China opened their markets to international investors by implementing laws and regulations that match the World Trade Organization (WTO) policies.

Such a philosophical change encourages foreign direct investors in China. Nonetheless, there are various risks involved in expanding to China. One of them is that China's culture is rooted on the Chinese communist, socialist philosophy, which affects the political climate thus the future FDI (Balasubramanyam & Wei, 2004). Looking at India, they recorded a decline regarding economic growth than most OECD economies as per 2013 (Agarwal, 2009). This slowdown is attributable to the reversal of monetary and fiscal stimulus that was launched as a response to worldwide financial turmoil.

Another factor is the weakening global demand that seems to be weighing on exports (Agarwal, 2009). However, currently, projections indicate that India's economy has hit the bottom and has taken a recovery path. This has restored confidence, revamped by the pro-growth agenda and monetary policy reforms of the new government. Moreover, the depreciating currency is also helping revive the export sector. Recently, legal reforms in India, notably the minimum wage increase and Disability Discrimination Act are directly affecting FDI prospects (Ye, 2014).

Nevertheless, as far as the environment is concerned, India's air quality has been negatively affected by urbanization and industrialization, leading to massive health issues. Therefore, regulations, pressure groups, and noise control organizations have been established to control waste. On a similar note, just like India, the Chinese government has focused on environmental issues in the nation. In fact, the Environmental Protection Administration has been upgraded to, the Ministry of Environmental Protection after realizing the significance of environmental protection.

Further, the environmental legislation in China has been empowered and has been effective in stemming environmental deterioration. Today, China is part of the Asia-Pacific Partnership, advocating for clean development. This partnership has served to unite the government and industries to enact common strategies that minimize climate change and pollution (Lederman et al. 2009). Social trends have revolutionized the business world, both in India and China. In India, the State Government has set a minimum wage that drives the high labor costs (Morrissey & Zgovu, 2011).

Moreover, the costs of raw materials are skyrocketing due to high overheads. China is not exempt from this high-cost issue. However, China is achieving large economies of scale courtesy of their bulk production. Unlike India, China does not rely on imports of raw materials. Therefore, they are enjoying comparatively low costs. Social attributes like changes in trends could profoundly affect an FDI in both India and China.

For example, the two nations have an aging population that has increased the pension costs to companies while increasing the hiring of older employees. To this end, it is evident that based on the above analysis, India and China are not only emerging but also flourishing markets with a positive future of FDI. Investors will benefit if they understand the external macro-environment of these economies and their operations will be smooth in future.

The stable political conditions and rapid economic growth in both India and China make these nations lucrative to.