Which of the following is an example of foreign direct investment in China?
A) U.S. auto entrepreneur Carroll Shelby buys stock in the Chinese auto company, Chevy Automobile Company.
B) Chinese Shenzen Airlines company buys a small U.S. midwest airline company, Air Chicago.
C) The U.S. company Wal-Mart buys a warehouse in Shanghai.
D) The bank of China purchases U.S. Treasury bonds.
E) A U.S. foreign exchange speculator buys $200,000 worth of the Chinese currency the yuan.

Question

Quizplus · Accepted Answer

Foreign direct investment refers to a company investing in and owning a subsidiary or facility in a foreign country. In this case, Wal-Mart (a U.S. company) purchasing a warehouse in Shanghai would be an example of foreign direct investment in China. Option A is incorrect because buying stock does not entail owning a subsidiary, B is incorrect because it involves Chinese investment in the U.S., D is incorrect because it involves Chinese investment in U.S. government bonds, and E is incorrect because it involves a U.S. individual speculating in the Chinese currency market.

Which of the Following Is an Example of Foreign Direct