What does foreign direct investment (FDI) involve?

Foreign direct investment (FDI) involves investments made by a corporation in one country into business interests located in another country. This typically takes the form of acquiring a company or establishing business operations such as factories or subsidiaries in the foreign country.

FDI is significant because it not only injects capital into the host country but also often brings in technology, management expertise, and better job opportunities. This investment can help drive economic growth in the receiving country, making it a critical concept in understanding global economic relations and development.

The other options do not accurately describe FDI. Investing in local businesses only refers to domestic investment, while government grants pertain to financial assistance provided to support local enterprises rather than direct investment. Lastly, loans for local infrastructures are part of financing mechanisms but do not qualify as direct investment since they do not involve ownership stakes or establishing a business presence in a foreign country.