The Effects of Foreign Direct Investment on Economic Growth and Employment Level in China

The Effects of Foreign Direct Investment on Economic Growth and Employment Level in China

Introduction

Foreign direct investment is the most critically development sector in any given economy. It mainly deals with transfer of money from one sector to the other thus contributing to economic influx. In the recent years, FDI has grown to adapt to the latest technologies, managerial capabilities and marketing skills. This shows a great upward progress of economy in a given sector. FDI has contributed to china’s economic progress by assisting the country in compensating the excessive domestic savings to enhancing rapid capital formulation. FDI normally plays a significant role in the short-run period of investment. Due to the factor of diminishing marginal returns, FDI doesn’t play any major role in the long-run period. Externalities and production spillovers do significantly contribute to economic progress due to its positive influence on efficiency and production. Globalization plays a major role in the stimulation of positive progress of FDI; this is due to its contribution towards liberalization of trade and development of exchange rate regimes.

Effects of FDI on employment

Foreign direct investment plays a significant role on the employment level of the China’s economy. This is due to business process outsourcing. The unemployment level is significantly low due to the maximum utilization of the total manpower in the economy. The unemployment level in China is at 3.7%; this shows that the employment level is quite stable compared to other huge economies globally. China population is approximated to be grossly 1.3 billion peole, this contributes to 17% of the global population. Imperative of the huge population influx, china proofs to be in the frontline of ensuring that its entire population is catered for in terms of employment.

China is one of the big economies that concentrate on foreign direct investments in all of its development aspects. It ranges from the engineering sector to hospitality industry. One of its robust foreign direct investment sectors is the civil and mechanical engineering sector. It is approximated that china caters for nearly 53% of all civil and mechanical projects across the global economy. The country benefits greatly from this investment due to its ability accommodate its entire manpower into the job markets thus beating the unemployment level. Stable employment level in an economy is one of the indicators of a robust economic growth. This is simply due to the fact that; the national treasury receives adequate revenue n terns of taxes from the entire working population. This revenue can then be used effectively to ensure steep end economic growth.

Foreign direct investments cater for approximately 63% of the national employment level. This serves to accommodate all the skilled labor within the economy both within and outside the economy. This is efficient enough towards the county’s economic growth, hence, more and more investment in FDI contributes greatly to the welfare of the economy. Another significant contribution of FDI towards the employment of the Chinese population is the, positive contribution of the foreign exchange