The Investment Decision of a Foreign Enterprise in China--A Study of an Investment Project of a Multinational Specialty Chemical Company

• Main Authors: Lin, Ling-Fang, 林玲芳
• Other Authors: Liu, Shuen-Zen Ph.D
• Format: Others
• Language: zh-TW
• Published: 2003
• Online Access: http://ndltd.ncl.edu.tw/handle/71041181131669786259

碩士 === 國立臺灣大學 === 會計學研究所 === 91 === Mainland China used to be a mysterious and unknown land to western world owing to closed-door policy implemented in 30 years before 1979. However the various kinds of reforms carried out the growth of economy significantly as results of the open-door policy implemented since thereafter. With excellent comparable advantages in economy such as unlimited human resources in supply and consumption and huge and cheap land etc., Mainland Chinese government has been amending the financial and economic laws and regulations to improve operating environment in order to attract investment capital flowed in out of outside world. Though there are severe structural problems in China’s economy, yet short-term economic growing momentum makes foreign investors crowd into the country. It was a year of economic recession for 2001 worldwide, however the year 2002 is very likely to be a ‘turning point’ for China’s macro-economy to leave the period of slowing growth behind, 2002 actual foreign direct investment (FDI) to Mainland China in the year exceeded 50 billion U.S. dollars which increased by 30% than previous year. The foreign investors have injected not only capital but also technology into China, foreign enterprises generated greater than 50% exports worth, provided 16% job opportunities and paid 17% of total income tax for China. China has not the economic miracle without foreign investors. In the 20 years between 1979 and 2000, GDP growth in PRC has achieve 9% in average and Per Capita GNP growth enlarged to 7.9% rapidly. Even in the difficult year of 2001 the Per Capital GMP of PRC grew 7.3%. The forecast for the GDP growth is quite optimistic due to continuity of open-door direction generally. Most foreign investors set wholly own companies or joint ventures or representative offices in presence to this huge market widely. Due to similar culture and increasing exchanges between China and Taiwan, most multinational companies send expatriates or people for short-term assignments from Taiwan to lead the functions of technical, marketing and administration for their companies in China. The primary purpose of this thesis is to understand the impact for a single investment project in China after its serials of reforms, especially China needs to continuously amend their financial and economic laws and regulations to meet WHO’s standards. Z Company, a water treatment & process chemicals maker and application provider is selected as a target for case study because this company is planning to place direct investment for a plant in Shanghai Free Trade Zone in consideration of its needs for business expansion, tax incentive and convenience of resources acquisition. As a result of analyses in feasibility and comparison to another plants in other countries in northeast Asia, the NPV and IRR are satisfactory; product cost is lower and lead time for order to shipment can be much faster. These are investment advantages for such a capital project. This study also explores the planning details for start-up such as logistics, human resource requirement, risk management, cost estimation, financing and application for tax credit etc. The risks of investment in China are mainly in credit control/bill collection and government’s execution capability in risk control to sustain the position of the best investment environment. Recently SARS broke out in Guang Dong and then spread out across the country. Foreign investors are observing the process of this risk control and considering not to put all eggs in a basket in order to prevent supply chain breaking off or over expansion. This study also provides a good reference for business plan for the small-scale direct investment in China.