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Investors always prefer to invest in their resident country as they are better informed about the developments in their parent country. The investor will also have easy access to the statutory filings of companies listed on the resident country's stock exchange. However, the return on investment is inextricably linked to the performance, and current phase of the economy. Returns generated by a matured economy is relatively lesser as compared to an emerging economy or a developing country that exhibits strong fundamental growth story.
A foreign country possessing the resources and expertise for planned development is poised to generate better returns as compared to matured markets. The reason being that such countries do enjoy higher rankings in terms of investors confidence and have strong backing of in-depth analysis from eminent experts studying macro economic development across the globe.
Broadly, factors like the stage of economic growth, the potential for industrial growth, progress towards strengthening the infrastructure, economic policies adopted by the country, political stability of the government, liberalization policy, investment policies and capital account convertibility has to be kept into consideration. Another major factor to be considered is the amount of foreign funds flowing into the emerging economy in the form of foreign direct investments (FDI) and foreign invested enterprise (FIE).
The Chinese economy is the fastest growing economy registering an average growth of more than 9 percent. The 11th five-year plan of China expresses targets a minimum 8 percent growth in the next five years that is far higher than the 1 to 2 percent range for the U.S. economy. Chinese economy
has obtained cumulative investments of more than $563.8 billion by the end of 2004. The energy needs of China's economy are the only major concern, which needs to be addressed by improving energy production. China is poised to become the leading consumers of metals like iron and steel, copper and aluminum by 2010. Infact China may account for close to 50 percent of the total steel consumption in the future years.
Investments by American companies in China emphasize on the level of confidence these companies have about the growth prospects of the Chinese economy. The biggest disadvantage of highest population has turned into the biggest advantage for the Chinese economy attracting investments in China. This is the reason behind pouring investment in Chinese economy, as big companies like General Motors and Coca-Cola have flocked in billions
of dollars in the Chinese market. Setting up base in China will act as a hub for supplying the greater China economies that include the Shanghai economy, Taiwan economy and Indian economy.
All the above-mentioned factors coupled with the leadership position of the Chinese economy in telecommunication, electronics and consumer durables market make it a foreign country worth investing.
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