Using OLI framework we can divide German’s motives in

Using OLI framework we can divide German’s motives in three main
categories.

As a Ownership advantages we can mention relatively low costs of
operations in China. Low cost of resources and cheap labour causes increasing
of attractiveness of China for German FDI. Germany disposes technology know-how
and managerial skills which leads them to good partnership with emerging
markets like China. What is more since 11 December 2001 China has participated
in World Trade Organisation (WTO). Before the accession to WTO investments in
China were limited because foreign companies cannot invest there. After that
everything changed and now foreign countries can exploit the China’s potential for
new products. German companies have now easier access to this market which
results in growth of German FDI. Furthermore, crisis in Asia did not affect
Chinese economy which is growing really fast. It generates in a large scale
interest of German players in infrastructure projects (PWC,2015)

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To the Location advantages may include market potential which is huge as
the Chinese consumers have significantly purchasing power. Disposable incomes
can equal or exceed those of European and American consumers. Now, the number
of potential customers is more than 1,4 billion (worldometers.info). Moreover,
more than 80% of German investments is located in three central regions. The
Shanghai region gives opportunities to be in vicinity with potential customer
and also is attractive due to high-level of infrastructure. The North East
region is rich in natural resources such as coal, ore and oil. Furthermore,
there is a good location, close border with South Korea and Japan which gives
possibilities to be local supplier to manufactures. The third region is the
Pearl River Delta where is a lot of small and medium enterprises.

Mature market in Europe

Countries in Europe are much more developed than Asian countries. It
means old continent’s market its already sadurated and its difficult for
investors to come into this market with something new.

As a internalisation advantage

In March 2014, a new tax treaty was signed by President of China Xi Jinping
and German Chancellor Angela Merkel. It changed the existing tax regulation for
the purpose of potential investors and made it much more clear and transparent
to compare. Firms from Germany will benefit from the reduction of withholding
taxes not only through savings, but also through simplified foreign direct
investment schames.

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