Multiple choice

China has been able to attract substantial amounts of Foreign Direct Investment based on its aggressive policies, strict enforcement and an investment-friendly climate in general. This investment and its consequences have greatly contributed to China’s pre-dominance as an economic superpower and its economic progress ever since the Red Revolution in the late 40s.

Which of the following, if true, could not have been offered as a logical reason for foreign investors to invest their money in China?

  1. Land rates in China are cheaper than in other comparable economies across the world.

  2. Labour mobility in China is much higher than in other countries.

  3. Import tariffs in other competing countries happen to be on the higher side as compared to those in China.

  4. Higher repatriation rate of company profits is allowed to the foreign companies investing in China than in other countries.

  5. Tax rates in other competing economies are pegged at higher levels than those in China.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

If labour mobility in China is more, it can cut both ways. It can help new companies get workers fast and it can also mean losing workers fast. This is, however, certainly a deterrent for a company which spends money and effort on their training. Hence, it is not a logical reason for investors to invest in China.

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