The objective of this study is to answer the following research question, 'Is transparency the main barrier to foreign direct investment into commercial offices in Beijing'. A mixture between and primary and secondary research are implemented in answering this research question.
Secondary research was used in the form of a literature review, which was solely desk based. A literature review is the first stage of any research: "all investigations that lay claim to being research should start off with a literature review" (Denscombe, 1998). The literature review essential function is to:
- Show that the research is aware of the available existing work already undertaken in the area
- Identifies what the researcher takes to be the key issue, the crucial questions and the obvious gap in the current state of knowledge.
- Provides signposts for the reader about 'where the research is coming from - it allows the reader to see which theories and principles have been influential in shaping the approach adopted in the proposed research.
The literature review was structured in such a way to overcome the lack of literature on this subject, as the literature on this topic is regarded as immature. There is no literature which compares transparency and foreign direct investment. As Newell (2009) points out: Given the significant international property investor interest in China, detailed empirical research regarding the dynamics of the China commercial property markets is still very limited.
Therefore the literature review was structured into two main sections; benefits of foreign direct investment and issues of foreign direct investment. The theories and issues all relates to international investment, however the principles still stand.
To investigate further primary research was needed. Therefore an open ended questionnaire was developed to deepen the knowledge of FDI. The advantage of open questions is that the information gathered by way of responses is more likely to reflect the full richness and complexity of the views held by the respondent (Denscombe, 1998) and an open ended questionnaire can lead to a greater level of discovery (Gillham. B, 2000). A closed questionnaire was rejected in favour of an open questionnaire is due to the fact that answers can be predetermined on the subject. Therefore qualitative data would be best suited for this subject.
A questionnaire was chosen over other forms of primary research due to the following reasons:
- Low cost in time and money. This is the overwhelming argument. You can send out a thousand questionnaires in the time to takes to do a semi-structured interview. The financial costs of mailing questionnaire are minuscule compared with the probable travelling costs, both in time and money, involved in interviewing. In this case China. Telephone interviewing cuts out the travelling but is still very time consuming.
- Easy to get information from a lot of people very quickly. If it is efficiently organized, responses to even a large scale questionnaire can be pulled in within weeks. The number of interviews one could hope to complete in that time would be little more than a handful (the people you want to interview may not be readily available or may be unwilling to be interviewed when you do contact them).
- Respondents can complete the questionnaire when it suits them. Interviewing can be a complicated business as far as finding mutually convenient times is concerned. In this case a respondent from China. But you can just leave a questionnaire for someone to complete when he or she suits him or her.
- Less pressure for an immediate response. Respondents can answer in their own time and t their own pace. If they want to think about their answers or go back check over it they can do so. This would give a more accurate response than a interview.
- Lack of interview bias. There is much evidence to show that different interviewers get different answers. Differences of perceived race, sex, social class, age, and educational level all affect the answers people give.
- Standardization of questions. If everyone gets the same questions then it can be claimed that another source of bias is eliminated.
When developing the questionnaire, it purposely erased the word transparency. The reason for this was so the expected answer could not be pre determined. This was so, the respondent could state other barriers apart from transparency and if they do mention it, it only strengthens my argument in the analysis.
Distribution of Questionnaire
From the literature review it is apparent that most of the work on foreign direct investment into real estate in Beijing is from people based outside of China. The main authors who tackle this subject include Cao, Keivani and Newell. They are all based outside of the China.
To rebalance this view, my primary research was solely targeted at people who work in China as they work from a day to day basis whether in investment research or managing investments. This would give this dissertation a Chinese perspective view of foreign direct investment into their country. It is also important to note that the people who work in China have a better access to market data than foreigners.
As 90% of real estate transaction occurs in Tier I cities, such as Shanghai and Beijing. It makes sense to investigate one of these two cities. Therefore the questionnaire was only targeted at the capital of China - Beijing.
The questionnaires were sent to the major property consultants and Investors based in Beijing. From the market overview it is apparent that the level of domestic investment have overtaken foreign direct investment which make the emphasis on Beijing even more important.
Ideally the more respondent the better, however the respondent were limited due to the following reasons:
- The questionnaire was sent my email rather than by post; as email is far more effective and quicker. However respondent may object this as 'spam' therefore deleting it as soon as they receive it.
- According to Denscombe is open questionnaires demand more effort on the part of the respondent (which will reduce their willingness to take part in the research).
- It must be stressed that that there are very few experts in China that know this subject. This can be narrowed down further due to complication of language.
- The greater difficulty arises when the approach is impersonal: questionnaires mailed to people you don't know (Gillham, 2000)
It would be ideal however to get someone from an Investment giants corporation such as Blackrock, ING and Pru, however they don't have a designated team in the UK that solely invest into China. From the literature review, these massive corporations like to spread their risk, by doing so they need to diversify their assets. This can be in different asset classes or different location across the world. This makes it very difficult to find a professional that specifically invests in real estate assets in China.
The respondent that have answered my questionnaire were forewarned and through work experience. These two respondents are:
- The first respondent is Frank Leung CEO of CRE8IVE Group. Cre8ive headquarters are base in Beijing and is one the very few firms who invest domestically into real estate. It currently owns two commercial buildings located in Beijing. Frank Leung is responsible for defining and setting the strategic vision of the Group, as well as managing the execution of the strategy to create sustained shareholder value growth for the Group's investors. Prior to joining CRE8IVE, he spent 10 years with Oliver Wyman (formerly Mercer Management Consulting)'s London, Hong Kong and Shanghai Offices. He left the company as a partner in the firm. During this period, he helped numerous blue chip multi-national and local Chinese companies across multiple industries to succeed in China's unique operating environment. He has extensive experience in the areas of strategy setting, mergers & acquisitions as well as operations improvement. He holds a Bachelor of Arts degree in Economics & Philosophy from University College London (UCL) and a Master of Science degree in Operational Research from the London School of Economics & Political Sciences (LSE). He is more than qualified to answer questions on foreign direct investment into real estate in Beijing. He would be an ideal candidate, and would add a beneficial insight into this dissertation.
- The second respondent is Shaun Brody is the Associate Director of Research for DTZ based in Beijing. DTZ is one of the top four real estate consultancy firms in the world. Shaun holds a Bachelor's degree in Geography from Birkbeck College, University of London and a diploma in Surveying from the College of Estate Management. Shaun is also a professional member of the Royal Institution of Chartered Surveyors.
Both respondents were given adequate information with regarding the questionnaire. Both respondents were happy to allow their names to be printed in this paper.