Location Of Multinational Corporation Investment In East Asia: A Strategic Approach

During the period 2000 to 2003, global FDI declined by 60 percent. Investment in the ASEAN-5 also fell while investment in China surged, causing it to become the world's biggest host country of foreign direct investment (FDI). These trends have significant implications for the countries concerned as FDI is understood to be a major force for growth and development, an agent for the spread of capital, technology and management skills and supports the upgrading of competitiveness of host countries. In addition to China's large market size and high growth rate, a range of environmental factors have been identified that will also assist in explaining these trends. These factors include China's entry into the World Trade Organisation, economic integration of the Chinese Economic Area, the Asian economic crisis and changing patterns of costs and government incentives across Asia. This study reports the influence of these environmental factors on the strategic decision-making process of multinational corporations (MNCs) that have restructured their subsidiaries in Malaysia as part of their production strategy in East Asia, which now includes significant operations in China. This paper will show that MNCs are not simply transferring production from Southeast Asia to China, but rather a more sophisticated segmentation of global production is taking place in East Asia.