A Study On Sino-ASEAN Direct Investment

Globalization has brought new opportunities and challenges for both China and ASEAN member countries, further intensifying the economic relations between China and ASEAN. China, as the biggest developing country, has long been the largest recipient of FDI among the developing countries and a destination for FDI from some ASEAN member countries. ASEAN, as a great economic body in East Asian Area, attracts foreign enterprises including lots of Chinese enterprises to invest in. The geographic predominance of China and ASEAN countries, allows trade and economic cooperation to have special comparative advantages. The good relationship between China and ASEAN, particularly the establishment of China-ASEAN Free Trade Area (CAFTA) and the new bilateral economic agreements not only increase trade flows between two sides but also FDI flows between two sides. As a binding agreement, the ASEAN Investment Area (AIA) aims to foster investment liberalization within the region. Investment barriers will be eliminated and national treatment granted for ASEAN investors by 2010 and for all investors by 2020. Therefore, China-ASEAN investment relationship will be strengthened under this context and a rising trend in China-ASEAN investment will appear.This paper is organized as follows:Chapter one gives a brief introduction of opportunities and challenges that globalization brings to those countries who want to invest abroad. In chapter two, some theories related to FDI are discussed including Dunning's eclectic theory, regional economic integration theory and trade liberalization theory. Details about FDI flows between China and ASEAN are dealt with in chapter three, which gives a general review on mutual investment in recent years and analyzes its characteristics. Based on the above chapters, chapter four investigates comparative advantages in attracting mutual investment from three perspectives: complementarities of economic resources, Chinese strong magnet for foreign investment and investment incentives in ASEAN member countries. Chapter five elaborates recent emerging factors further enlarging the size of FDI flows between China and ASEAN. New bilateral economic agreements reinforce regional economic integration. The establishment of CAFTA helps to promote investments and to create a liberal, facilitative, transparent and competitive investment regime. The new mega economic zone serves as an important platform of economic cooperation between China and ASEAN. ASEAN's reforms and FDI policies aim at accelerating economic integration, reaching a single market and production base, and lowering the barriers to the flow of goods, services, investment and skilled labors. This paper concludes with analyzing the prospect of FDI flows between China and ASEAN. In this chapter, the paper not only sums up the main problems that restricting the development of China's FDI in ASEAN but also proposes some feasible suggestions to improve China's FDI in ASEAN.