The liberalization of Foreign Direct Investment (FDI) regimes by different countries has been geared to attracting more FDI and to achieve the benefits that FDI brings. Such liberalization at the present time is fostering a boom in the increasing globalization of business. Such a boom can produce considerable benefits for economic growth and development, but it can also lead to the domination of certain markets by a few major corporations. Transnational corporations thus often have greater competitive strength so that FDI might increase their market concentration and raise the scope for restrictive or anti-competitive practices by firms (1997 World investment report, 1998, 28). Many countries find that attracting FDI serves their needs and helps develop their economic structure, and an analysis of the issue of FDI shows how it can benefit the country receiving it even if it may create inequities in the global marketplace.
FDI, as Luiz Jr. (1999) notes, "is conventionally defined as a form of international inter-firm co-operation that involves significant equity stake and effective management decision power in, or ownership control of, foreign enterprises" (Luiz, 1999, 2). However, Luiz says that it also encompasses other broader, heterogeneous non-equity forms of cooperating involving the supply of tangible and intangible assets by a foreign enterprise to a domestic firm, and such broader collaborative associations may include most types of quasi-investment arrangements, including licensing, leasing, and franchising; start-up and international production sharing arrangements; joint ventures with limited foreign equity participation; and broad research and development cooperation (Luiz, 1999, 2).
A consideration of the kinds of incentives used by different countries and the degree to which these are effective, as well a why they are effective, will lead to an examination of the way incentive have been used by China in part...