What Is a Direct Investment?

Direct investment refers to an investment method in which an investor directly opens a factory to set up a store to operate, or invests in the purchase of a considerable number of shares in an enterprise, thereby having operational control over the enterprise. The main characteristic of direct investment is that the investor has a permanent interest in a company in another economy. The permanent interest means that there is a long-term relationship between the direct investor and the enterprise, and it exerts a considerable influence on the operation and management of the enterprise. Direct investment can take the form of directly establishing branch companies abroad, or it can take the form of purchasing a certain percentage of equity in foreign companies.

Direct investment

Direct investment refers to an investor who directly opens a factory to set up a store to operate, or invests in a considerable amount of shares in an enterprise, thereby having operational control over the enterprise

One

Direct investment means that investors will

(1) Investor start

The main characteristic of direct investment is that investors have a permanent interest in a business in another economy. Permanent interest means that there is a long-term relationship between direct investors and the enterprise, and it exerts considerable influence on the operation and management of the enterprise. Direct investment can take the form of directly establishing branch companies abroad, or it can take the form of purchasing a certain percentage of equity in foreign companies.

First, investors obtain part or all of the management control rights of the invested enterprises based on the capital they invest, which facilitates the implementation of business strategies and management measures.

second,

Direct investment can be divided into inward direct investment and outward direct investment. Inward direct investment is the act of an enterprise investing funds in production and operating assets in order to obtain returns, such as investing in fixed assets and advancing working capital. Foreign direct investment, such as cooperation and joint ventures between enterprises.

1. Tax management of investment direction

As an important economic lever, taxation reflects the country's economic and taxation policies. In order to optimize the industrial structure, the state often influences the choice of investment direction of enterprises through tax policies. For example, the tax law stipulates that for high-tech enterprises supported by the state, corporate income tax is levied at a rate of 15%; for venture capital enterprises engaged in investments that the state needs to support and encourage, the taxable income can be deducted by a certain percentage of the investment.

2. Tax management of investment locations

When making investment decisions, companies need to consider the tax treatment of investment locations and make full use of preferential policies. In order to support the development of certain regions, the state has implemented a preferential tax policy for a certain period of time. As stipulated in the tax law, domestic-funded enterprises located in the encouraged industries in the western regions of the country will levy corporate income tax at a rate of 15% from 2001 to 2010.

3. Tax management of investment methods

Enterprises can invest in currencies, in kind, intellectual property rights, and land use rights. According to the provisions of the tax law on different investment methods, a reasonable choice of investment methods can achieve the purpose of reducing the tax burden.

4. Tax management in the form of corporate organization

After the enterprise reaches a certain scale, it needs to establish a branch office. Whether the branch office has the legal personality determines the method of paying corporate income tax. If it has the status of a legal person, it shall independently report corporate income tax. If it does not have the status of a legal person, it shall be calculated and paid by the head office in aggregate. Determining the establishment of a branch based on factors such as possible uneven profits and losses, differences in tax rates, etc., will reduce tax costs reasonably and legally.

Direct investment and indirect investment both belong to the investor's purchase behavior of assets that are expected to bring returns, but there are substantial differences between them: direct investment is the union of fund owners and fund users, and it is asset ownership and asset management The unified movement of rights is generally a production business, which will form physical assets; while indirect investment is the decomposition of fund owners and users of funds, a separation of asset ownership and asset management rights. Investors have no direct influence on corporate assets and their operations. The purpose of ownership and control is to obtain its capital gains or to maintain value.

Link between direct investment and indirect investment:

In addition to the differences, direct investment and indirect investment have a very close relationship: through indirect investment, you can raise the required capital for direct investment, and monitor and promote the management of direct investment. With the development of the modern economy, the scale of production has expanded rapidly. It is difficult to invest in high-tech and large-scale projects with ordinary individual capital alone. Indirect investment, typically in the form of securities purchases and transactions, makes society a small amount of idleness. The collection of funds has become a long-term, relatively stable and huge amount of investment funds required by the enterprise, solved the contradiction of investment needs, and is an important channel for mobilizing and redistributing funds. Therefore, indirect investment has gradually become the main and basic investment method. It can be said that the development of direct investment must depend on the development of indirect investment; direct investment also has a significant impact on indirect investment. This is mainly because changes in the company's production capacity will affect investors' expectations of the prospects of securities issued by the company, thereby The level of indirect investment fluctuated.

At the press conference on the 10th anniversary of the establishment of the China-ASEAN strategic partnership, Chinese Vice Minister of Commerce Gao Yan said that as of the end of June, China's direct investment in ASEAN countries had accumulated nearly US $ 30 billion, accounting for about 5.1% of China's foreign direct investment. ASEAN has surpassed Australia, the United States, Russia and other countries to become China's fourth largest foreign direct investment economy.

The State Council Information Office held a press conference on the 23rd. Gao Yan, Vice Minister of Commerce, Yu Ping, Vice Chairman of the China Council for the Promotion of International Trade, Zhang Xiaoqin, Vice Chairman of Guangxi Zhuang Autonomous Region, introduced the economic and trade cooperation and other aspects of the 10th anniversary of the establishment of China-ASEAN strategic partnership, and answered questions from reporters .

Gao Yan said that by the end of 2002, the two-way investment between China and ASEAN had totaled US $ 30.1 billion. In the past 10 years, the two-way investment letter between China and ASEAN increased by more than 70 billion U.S. dollars, accumulatively reaching 100.7 billion U.S. dollars, of which ASEAN countries invested 77.1 billion U.S. dollars, and Chinese companies invested 23.6 billion U.S. dollars in ASEAN. As of the end of June 2013, China's direct investment in ASEAN countries totaled nearly US $ 30 billion, accounting for about 5.1% of China's foreign direct investment. ASEAN has surpassed Australia, the United States, Russia and other countries to become China's fourth largest foreign direct investment economy after Hong Kong, British Virgin Islands, and Cayman Islands.

It is reported that China's direct investment in ASEAN countries is mainly concentrated in the fields of power production, business services, wholesale and retail, manufacturing, mining, and finance. So far, China has set up nearly 2,500 direct investment enterprises in ASEAN, employing nearly 120,000 local employees. At the same time, the scale of ASEAN's investment in China is constantly expanding. In 2002, the actual ASEAN investment in China was US $ 3.26 billion; in 2012, this figure was US $ 7.1 billion, which more than doubled. In the first half of 2013, ASEAN's investment in China reached US $ 4.1 billion, accumulating more than US $ 80 billion, accounting for 6.6% of China's total foreign investment attraction. At present, China has become the fourth largest source of foreign investment in ASEAN, and ASEAN is China's third largest source of foreign investment.