2.2 Current Problem
In February 2009, Donald Trump and his daughter resigned from the Trump Entertainment board of directors due to a feud with the bondholders. Trump also quits as chairman. Four days after his resignation, Trump Entertainments Resorts Inc. is now under bankruptcy again.
3. Planning Development
Foreign Direct Investment (FDI) represents capital invested in a country that provides manufacturing and service capabilities for both native consumers and world markets. FDI is instrumental in bringing goods and services to the global marketplace, and the influx of foreign investment not only displays investor confidence in the business and the geopolitical climate of the host country, such capital also links national economies.
The benefits of FDI flow to both the supplier of capital as well as to the host region. China is one country that has stepped up to capitalize on these benefits. According to China's commerce ministry, FDI in 2010 surpassed $100 billion for the first time. Over the entire year ending December 2010 inbound FDI increased 17.4% to $105.74 billion. Let's take a look at the factors that drive foreign investment in China, and examine what this means for investors - and the Chinese economy.
There are several factors that affect the amount of FDI that pours into China:
-
Capital Availability
In the early 2000s, China overtook the United States as the world's largest recipient of foreign capital. FDI is comprised of capital that an outside investor is willing to place (and risk) within a local region. Conditions in the global capital markets and general economic environment play a role in determining the flow of FDI into China. A thriving global economy, capital markets and business environment create large swaths of investable capital, a portion of which is converted to FDI. Large amounts of investable capital that proportionately overwhelm the number of sound local investment ideas can cause institutional, company and individual investors to invest their wealth in emerging and developing markets.
-
Competitiveness
China's attractiveness as a destination for investment capital rests on its development of infrastructure, resource availability (physical and labor), productivity and workforce skills, and the development of the business value chain. The level of maturation of these elements can make China more attractive for FDI relative to other nations, such as India, that compete and vie for the same investment capital. A growing and developing economy requires infrastructure and resources in order to facilitate the sale of goods and services. Lower transaction costs, due to the maturation of these elements, enables investors to earn returns on their investments as their enterprises are able to generate profits. Roads, highways, bridges and other forms of physical infrastructure should be present, maintained and provide sufficient safety for the transportation of goods as well as for the commute of employees. Another component for attracting FDI involves the availability of low-cost, skilled employees who possess the necessary aptitudes, experience and proficiencies to create, manufacture, and provide goods and services that can compete in global markets.
-
Regulatory Environment
When a national government enacts and enforces rules and policies aimed at favoring state entities at the expense of privately held firms, such an environment can be detrimental to initiatives that aim to attract FDI. As such, the regulatory environment can either encourage or impede foreign direct investment in China. Excessive regulations tend to hinder entrepreneurial and commercial activities, as managers and employees must spend more time and money to comply with rules and regulations. If an investor wants to set up a manufacturing facility in China, high start-up costs, legal exposure and other cumbersome compliance items may encourage that investor to set up the facility elsewhere, where the business climate is more conducive to industry. Other types of regulations include mandatory joint venture partnerships in which, together with the foreign investor, the business is required to have a Chinese government agency or local company as a partner. A judicial system that is biased toward protecting Chinese locals - who conduct what are sometimes perceived as unfair, illegal, or unethical business practices - can also contribute to making China a less favorable investment destination. Another regulatory determinant involves the government's promotion of investment activities by providing attractive financial incentives in the form of tax breaks, grants, low-cost government loans and subsidies. Government-sponsored financial inducements provide the possibility of making a business more profitable and in a shorter amount of time.
-
Stability
Political and economic stability can facilitate an influx of FDI. Stability represents predictability and the opportunity for enterprises to gain better foresight into the future. Alternatively, constant social unrest, rioting, rebellions and social turmoil are settings not conducive to business. Economic instability can also contribute to hyperinflation, which can render the currency virtually obsolete. To encourage FDI, citizens/workers as well as businesses should have a reasonable basis for respecting Chinese law and order. Violence, criminal activity, blackmail, kidnappings, and counterfeit currency and products have all been problems in China that serve to undermine the efficacy of conducting trade activities. The justice system should also have effective mechanisms for reducing, or altogether eliminating, rogue and corrupt elements of law enforcement agencies.
-
Local Chinese Market and Business Climate
The most glaring aspect of China is the sheer size of its population and market, and the prospects for growth that result from this size. The ability of enterprises - backed by foreign capital - to sell to a sizeable local market makes China an attractive destination for FDI. As the Chinese economy continues to prosper, evolve and mature, higher-end industries such as healthcare, information technology, engineering, robotics and luxury goods, among others, can gain a bigger footprint in China as its local conditions, resources and other FDI determinants are enhanced. Additionally, economic growth and FDI can start a "success domino effect." The more the region attracts FDI, the more it grows. The more it grows and matures, the more investors are willing to provide FDI. This point underscores the advantage of China's sizeable market, which presents growth opportunities in current and prospective commercial activity. The more FDI flows into the country, the greater the economic chain reaction, providing a positive effect to sustain such growth.
-
Openness to Regional and International Trade
Market openness serves several important roles in attracting FDI. Of critical importance is a business' ability to sell its products and services to both local and foreign markets. If Chinese-based enterprises have limited or no access to foreign customers - particularly the United States, Western Europe, Japan and others - then the local market may not be enough to warrant a significant investment in money and energy. Trade barriers such as tariffs are typically viewed as disincentives by other nations. An American product that is subject to high tariffs in China will be less in demand in the Chinese market due to the artificially inflated price. Such actions typically prompt retaliatory tariffs from the U.S. on Chinese products, or in certain extreme cases, an outright ban on certain goods and services.
Export-friendly policies, then, can play a major role in deciding whether to invest in China, especially for enterprises that have a large portion of their anticipated market shares located outside of the local market. In efforts to create a more business-friendly environment, regional and international free trade agreements are typically initiated by market-progressive governments as reasonable mechanisms for inducing economic activity and growth.
With all the information stated above, it is believed that China is a great place for further investment. Therefore, we strongly recommend Donald Trump to have his business collaborated with Chinese companies – Donald Trump will provide the land for buildings while his business partners will invest the money into their future projects. He owns quite a number of lands around the world, especially in China and Middle East.
In addition, Middle East also seems to be a great place to invest. It is because nowadays a lot of investors seem to be starting to invest in Middle East countries such as Dubai and Kuwait.
A great business proposal is essential to convince the Chinese and Middle East businessmen that the project is worth investing. We would propose that Donald Trump should build more houses, buildings, or even skyscrapers in various cities of China and Middle East.
4. Conclusion
Donald Trump is a billionaire, real estate mogul extraordinaire, and host of the television show The Apprentice. Before he reached the height of the wealth and fame he now enjoys, Donald Trump had his share of financial problems.
During the 1980s, Donald Trump continually bought buildings, yachts, hotels, and casinos and even owned his own airline. The recession of the early 1990s, however, hit him very hard. At its worst, his companies reportedly carried debts of $11.4 billion. He was forced to place some of his casinos and other businesses in bankruptcy. And because he had personally guaranteed $1.3 billion of his companies' debt, Donald Trump was on the verge of his own personal bankruptcy.
However, Donald Trump did not run from his creditors. He did not sit back and hope things got better. No, he fought back. He used all his negotiation and business skills to resolve hundreds of millions of dollars of debt. He didn't take no for an answer. He worked hard to talk to the right people and get to the decision makers. He remained flexible, offering a little here, taking a little away there. He was always alert to his actions and knew where he wanted to go. He made people at the 99 banks he owed money into his allies so that he could work out his issues with them. He made sure the creditors realized they were getting the best offers that he could make at that time.
Donald Trump has said that those lean times helped him learn that he could handle pressure. Donald Trump is now the 278th richest man in the world, with a net worth estimated by Forbes Magazine to be $2.6 billion. With nerves of steel, Donald Trump climbed from debt to success and will indubitably continue to do so if financial problems again arise.
With everything Donald Trump has gone through, we think it will be better to play safe rather than investing with huge risk and causing other financial crisis for Donald Trump. We believe the solution we propose is safe and profit-earning. China has been voted to be one of the best places in the world to invest in real estate and it is definitely a great place for Donald Trump to look for business partners and make a comeback.
Also, it is advised that Donald Trump should get rid of his non-profit-making assets, for example, his airline and other real estates.
5. Recommendations
The solution to Donald Trump’s problem is for him to expand his company in China mainly the big cities such as Beijing. There are certain ways to expand the business. Firstly, Donald Trump should have his business collaborated with Chinese companies. Donald Trump will provide the land for buildings while his business partners will invest the money into their future projects. To convince the Chinese Businessman to invest in Trump companies, Donald Trump should propose a great business proposal which include hotels, casinos and luxurious apartments.
Hotels such as Hilton and Grand Hyatt have proven a fact that expanding your hotel business in China can be a success especially if it’s located at a popular tourist spot such as Beijing. Beijing is one of the most popular tourism spots in China because it’s the capital city of China and Beijing's Capital International Airport is the second busiest airport in the world. In 2011, Beijing plans to double its annual tally of international visitors to 10 million within five years to catapult itself into position as one of the world's top tourist destinations.
The Trump casino should also be opened in China because gambling is quite popular among the Chinese and the population in China is the highest in the world. Therefore, the casino will have a higher chance of getting customers than other countries such as Thailand or Japan. Most Asian celebrities are also located in China. So, instead of flying all the way to the United States for some gambling, they can save time and money by just gambling in an international casino in their own country.
Luxurious apartments should also be built in China to accommodate more people in the country because the country is overpopulated. Many millionaires and billionaires in China would be able to afford the luxurious apartments and would be willing to buy it to increase their social status. It would be a big hit because it would be the first time that the Trump Company owns a building in Asia.
Feb. 17, 2009: Four days after Trump's resignation, Trump Entertainment files for Chapter 11 bankruptcy. Like other Atlantic City gaming halls, the financially troubled Trump casinos are battered by the recession and fierce competition from Pennsylvania's slot parlors.
Aug. 3, 2009: Trump Entertainment chooses Donald Trump's buyout offer over a competing plan floated by corporate bondholders. The buyout is subject to approval by the bankruptcy court and creditors.
List of references
Websites
Journals
Appendixes
Company Problems Timeline
Jul, 1991: Filed for first Chapter 11 Bankruptcy Protection.
Aug, 1991: U.S Bankruptcy Court approved of the financial restructuring of Taj Mahal.
Mar, 1992: Filed for Chapter 11 for Trump Plaza Hotel & Casino and Trump’s Castle.
May, 1992: Trump Plaza and Trump’s Castle won bankruptcy court approval to restructure their debts.
Nov, 2004: Trump’s third bankruptcy. Files for Chapter 11 bankruptcy again.
May, 2005: Trump casinos emerged from Chapter 11 protection under a new company, Trump Entertainment Resorts Inc.
Feb, 2009: Donald Trump and daughter resigned from the Trump Entertainment board of directors.
Feb, 2009: Trump Entertainments Resorts Inc is currently under bankruptcy again.