On The Impact And The Inducement Of Transnational Corporations Divestment In China

Divestment has emerged with the development of foreign direct investment. With larger scale of FDI in China, most transnational corporations have gone into mature stage and operation stage. So with the development of transnational corporations, more and more divestments have appeared in China. This article studies on the foreign divestment in China, on the basis of the analysis on different theories of foreign investment and divestment, and then uses many analysis methods, such as comparative analysis, data reduction, case study and so on ,to illustrate the divestment phenomena, at last conclude the inducement and the affect of divestment. The result of this article is helpful to perfect the research of the foreign divestment theory and help our country to avoid the risk of divestment, and also has practical significance on how to use FDI effectively and reasonably.This article mainly analyses on the characters of divestment in our country from three aspects of the time, the subject of divestment and the area of divestment in china. All of these analyses are to find out the reason for multinational company divestment. The research finds that the key inducement of divestment is different in different period, for different investors and different industries. Generally the inducement of divestment in China could be divided into internal cause and external cause. The internal cause means the transnational company's factor including the parent company and her subsidiaries. The external cause means the economic and political affections of the host county, the mother country and the competitors of FDI. The impact of divestment in our country is further investigated. Different kinds of investments have different main reasons for its divestment which have different affect on our country. Divestment in Labor incentive industries is the result of the improvement of our county industry. Divestments caused by management failure are the result of the survival of the fittest. Such kind of divestment doesn't have negative effect on our country, but optimizes our industry structure. On the contrary, as the negative effect of the divestments in capital and technological incentive industries is huge, we have to avoid that kind of divestment. That's why we have to pay attention on the investment quantity to avoid the negative effect of divestment, which decides the divestment. At the same time, we have to pay attention to the existing foreign investment and make the adjustment of the policy in order to avoid large scale of divestment. As the trend that our countries'cheap labor comparison advantage is disappearing is becoming apparent, it is essential to find our new comparison advantage to keep stability of the inflow of FDI.