Analysis On The Interrelationship Between Transnational Corporation And Host Nation's Government In Foreign Direct Investment

The rapid development of transnational corporations' FDI is the vital manifestation of economic globalization, which is one of the main trends in today's international economic development. Transnational corporations' FDI brings about for the host nation not only financial capital, but also managerial skills and productive technology, helping it to expand international markets. This has been confirmed by more and more nations. Therefore, it has become the main goal for all nations to formulate reasonable foreign policies to absorb much more FDI.However, for a long period, studies on investment decision in theoretical and practical circles are only confined to analyses on enterprises' investment behavior and fail to consider the possible changing of government's policy. While in fact, the two sides are interdependent and inter-restrictive. This makes the problem of investment decision one typical problem of game equilibrium.This paper begins with the introduction of present conditions of transnational investment theory. Then it analyzes the interrelationship between the host nation's government and transnational corporations in transnational investment, drawing into the method of game theory which formerly is only limited to researches on the problems on microeconomic level. In the meantime, having based on using some developed and underdeveloped countries' favorable policies in absorbing FDI for reference, this paper analyzes the present conditions and problems about Chinese foreign policies aiming to give some constructive advice to the Chinese government.