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UDC 339
ANALYSIS ON THE INTEGRATION OF INTERNATIONAL DIRECT INVESTMENT
AND INDIRECT INVESTMENT
Huang Chen Scientific supervisor - Yu. A. Anikina
Reshetnev Siberian State University of Science and Technology 31, Krasnoyarskii rabochii prospekt, Krasnoyarsk, 660037, Russian Federation E-mail: 1479560770@qq.com
International direct investment and international indirect investment, as the two main ways for a country or region to make international investment, are ultimately aimed at maximizing the benefits.
Keywords: international direct investment, international indirect investment, interaction, integration.
АНАЛИЗ ИНТЕГРАЦИИ ПРЯМЫХ И КОСВЕННЫХ МЕЖДУНАРОДНЫХ
ИНВЕСТИЦИЙ
Хуан Чэнь Научный руководитель - Ю. А. Аникина
Сибирский государственный университет науки и технологий имени академика М. Ф. Решетнева Российская Федерация, 660037, г. Красноярск, просп. им. газеты «Красноярский рабочий», 31
E-mail: 1479560770@qq.com
Международные прямые инвестиции и международные косвенные инвестиции, как два основных способа для страны или региона осуществлять международные инвестиции, в конечном итоге направлены на максимизацию выгод.
Ключевые слова: международные прямые инвестиции, международные косвенные инвестиции, взаимодействие, интеграция.
Links and differences between international direct investment and international indirect investment. Sufficient profit investment opportunities make the occurrence of international investment logical. Domestic investment is divided into direct investment and indirect investment. Similarly, international investment also has such a division: indirect investment that gives money to others and then takes interest; direct investment that manages capital and controls project operations to earn profits. International direct investment refers to the behavior of a company or individual in a country to put tangible or intangible assets overseas to establish a business through new construction or mergers and acquisitions. Direct investment [1]. International indirect investment refers to investment in the purchase of foreign stocks, bonds and foreign loans. It is a general term
for international securities investment and international credit investment. It mainly refers to investment through international credit and purchase of foreign securities, including government loans. Bank loans, loans from international organizations, international bonds and international stocks, etc.
Both are the main ways for a country or region to make international investment. The ultimate goal is to maximize the benefits and interact with each other. They are the most important components of the balance of payments project, and they affect the balance of payments of a country. The two can be transformed into each other through equity investment, cross-border mergers and acquisitions, convertible corporate bonds and venture capital.
The fundamental difference between international direct investment and international indirect investment lies in whether investors can effectively control foreign enterprises as investment targets. Direct investment either wholly or partly owns foreign enterprises, and directly or indirectly operates foreign enterprises. Indirect investment rarely involves this issue [2]. First, the direct goals of the two are different. The direct objective of international direct investment is to obtain control, and the direct objective of international indirect investment is to obtain dividends or benefits. Second, the two have different investment roles. As international direct investment not only imports capital to the host country, its advanced management and management methods also affect the invested enterprise, which will be clearly reflected in the production and operation of the invested enterprise. Since international indirect investment does not involve control, it is only the international transfer of monetary capital. The purpose of capital is only profit, and it does not involve management and other aspects. Third, investment advantages are different. According to the composition of investment capital, the investment advantages reflected by the two investment methods are also different. International indirect investment generally reflects the flow or transfer of international monetary capital. Capital advantage is the main manifestation of international indirect investment advantage [3]. International direct investment is much more complicated. It reflects not only the international transfer of monetary capital but also international flows of other asset forms. The advantages of investment are not only reflected in monetary capital, but also management advantages and resource advantages. Fourth, there are different degrees of investment risk. Due to the complexity of international direct investment, the risks are generally greater than international indirect investment. International direct investment generally involves participating in the company's operating activities. Long production cycles increase investment risks. The investment cycle of indirect investment is generally short, the return is relatively stable, and the risk is much smaller than that of direct investment.
The convergence trend of direct investment and indirect investment. There is a clear difference between international direct investment and indirect investment in theory, but it is not equally clear in practice. On more and more occasions they go with each other, and sometimes it is even difficult to draw a line between them. It is mainly manifested in the following points: First, the highly developed capital market enables a large number of foreign investment activities to have both the connotation of direct investment and the methods and characteristics of indirect investment.
In the capital market, assets are expressed in the following four basic forms: first, cash assets: various monetary assets; second, physical assets: manifested as various means of production such as fixed assets, current assets, intangible assets; third, Credit assets: various claims and debts; fourth, securities assets: manifested as securities such as stocks, bonds, commercial paper, and various investment income certificates. The international flow of physical assets is an essential feature of
FDI, while indirect investment focuses on the flow of other financial assets. However, in the modern economy, the transfer of physical capital must rely heavily on the flow of various financial assets. When Kodak invested in China's lottery industry, it did not simply move production lines, management personnel, patented technology, etc. into China, but carried out through various methods such as equity investment, credit arrangements, long-term contracts, and cash flow. With the rapid development of the capital market, with the help of financial intermediaries and various financial instruments, the mutual conversion of these four assets has become increasingly convenient and fast.
From the perspective of the initiation of FDI, the situation of indirect investment factors in FDI is briefly listed as follows: First, the proportion of mergers and acquisitions in FDI is getting higher and higher, and the methods are becoming more and more complicated. Compared with direct investment in new construction, mergers and acquisitions have unique advantages: first, it allows investors to eliminate a competitor while entering the host country market; and, it allows investors to obtain acquired companies that are not easily available on the open market Trademarks, technologies, management experience, relationships, sales channels, etc.; the short construction period of mergers and acquisitions allows investors to quickly enter the host country market and rapidly expand product lines and marketing channels, which is conducive to reducing uncertainty in operations; Mergers and acquisitions can also allow investors to take advantage of the devaluation of the host country's currency, the stock market's collapse, and the financial crisis of the host country's enterprises to acquire assets at low prices to engage in overseas operations. Second, minority equity investments [4]. Although this investment is in the form of equity, it does not require control over the funded enterprise, and it is also different from indirect investment that simply seeks stock appreciation. In order to remain unbeaten in the competition, many companies actively seek cooperation with peers and even excellent companies in other industries in terms of technology, products, markets, etc., in order to strengthen the alliance and complement each other. By making equity investments in the other party, it is possible to strengthen this alliance relationship while maintaining the independence of their respective operations and management. Third, from the perspective of the sources of FDI funds, the sources of funds for transnational corporations' overseas direct investment can be summarized into four aspects: funds within the company group, funds in the home country other than the parent company, local funds in the host country, and international funds. From the second and fourth sources of funding, direct investment and indirect investment are just the front line. The direct investment behavior of multinational companies is supported by the indirect investment behavior of numerous investors in their home countries and even third countries. Fourth, from the perspective of FDI recovery, traditional direct investment is gradually recovered through the profits of overseas companies. Under the highly developed capital market, companies can also use various asset securitization methods to transfer risks and recover investment, thereby It makes FDI use the recovery method of indirect investment in recycling.
The international investment behavior of some investment institutions often has the characteristics of both direct investment and indirect investment. The international capital market has high risks and high technical requirements. Most of the investors who can provide large amounts of funds are commercial banks, investment banks, insurance companies, and various institutional investors. Traditionally, it is considered an indirect investment, but because of its large investment scale, in order to ensure the safety and profitability of the investment, they usually have
a very close relationship with the investee and often become strategic investors as investees. A member. This in turn makes their investments characteristic of direct investment. Although they do not directly participate in the operation and management of the enterprise, they constantly monitor the operation status of the enterprise and have an important impact on the development direction of the enterprise, profit distribution and even changes in some key personnel. Although they will not directly provide enterprises with operating resources such as technology and management experience, they can serve as a bridge for the invested enterprises to obtain these international experiences. As a special investment fund, the venture capital fund has the dual characteristics of direct investment and indirect investment. It is a direct investment because it provides equity capital and often occupies most of the equity of venture companies. At the same time, it is also an indirect investment because the purpose of venture capital is not to hold a share or directly operate the enterprise, but rather with the help of funds and technology, the development of the funded enterprises is promoted, so that the funds are value-added.
The integration trend of the two reflects both the development of financial intermediary forces and higher requirements for financial intermediaries. Without financial intermediary leads, their tight combination is unimaginable. Acquisitions, mergers, securitization of various assets, collection of related information, etc. all require a large amount of professional knowledge and skills, and financial intermediaries need to provide professional services in order to proceed smoothly and efficiently. At the same time, under these conditions, production enterprises have higher requirements for financial intermediaries. It must not only be able to provide a full range of financial services from financial finance to investment consultants, but also to provide services in the world to provide services for multinational companies. International expansion provides financial support.
References
1. Xu Jianbo. The Development of International Indirect Investment and China's Analysis of Its Introduction // China Development Press 2016. P. 21-24.
2. He Xiaofeng. Investment Banking. 2002. P. 54-57.
3. Xiao Weiguo. Research on Multinational Corporations' Overseas Direct Investment // Wuhan University Press, 2002. P. 78-81.
4. Chen Mingsen. China Capital Operation Report // China Development Press, 2009. P. 33-36.
© Huang Chen, 2020
