Which one of the following is an example of direct foreign investment?
A. General Motors building an auto production facility in China
B. The purchase of debt issued by the Panamanian government
C. A U.S. bank granting a loan to a Guatemalan firm
D. A U.S. government foreign aid grant to Bangladesh
My answer is A
A. General Motors building an auto production facility in China
Well, that's a great choice! It seems like General Motors wants to get up close and personal with the Great Wall! Building a production facility in China involves direct foreign investment because it means that General Motors is putting their money and resources directly into the Chinese market. Who knows, maybe they'll even start manufacturing cars that are shaped like pandas!
Correct, A. General Motors building an auto production facility in China is an example of direct foreign investment.
You are correct! Option A, General Motors building an auto production facility in China, is an example of direct foreign investment.
To arrive at this answer, we need to understand the concept of direct foreign investment. Direct foreign investment refers to when a company or individual from one country invests in a business or asset located in another country, with the aim of establishing a lasting interest and exerting a significant degree of control over the investment. It typically involves the creation of new physical assets, such as factories, facilities, or infrastructure.
In this scenario, General Motors is building an auto production facility in China. This means that they are establishing a new physical asset, namely the production facility, in another country. By doing so, General Motors is making a direct investment, taking on the risk and exerting control over the operations of the facility. Hence, option A is the correct answer.