FDI is placed in different parts of the world based on how the investor perceives the economic situation in those areas and on possible incentives which countries may use to attract the attention of such investors. Billington (1999) cites a number of key factors which could influence FDI location decisions. Billington cites the role of multinational enterprises (MNEs) in this process, noting that this role has become more important in the emerging global economy, probably because of recent changes which make multi-country markets seem more attractive. One important factor has been the arrival of deregulated markets and the ongoing reduction in international trade barriers, allowing MNEs to compete on more equal terms with foreign rivals. The development of new information technologies has also had two important effect: 1) it makes it possible for consumers to become more aware of the goods that foreign companies have to offer, al

The 1980s was a period of economic growth and political liberalization for Taiwan as its economy was rapidly industrializing, its middle class was becoming more prosperous and more numerous, and after 38 years, martial law was lifted in 1987. Taiwan moved at the same time to reduce tensions with mainland China, which was successful for a time but which has become more of a problem recently. Taiwan has developed form an authoritarian state into a relatively democratic state (Dunung, 1995, 165-167).

Hong Kong, Singapore, South Korea, and Taiwan are known as the Four Little Dragons and noted for their growth, while China is now known as the Fifth Dragon in Asia. Much attention recently has been directed at a region in South China called the Pearl River Delta, a region with spectacular economic performance seen as a miracle surpassing even in scale the East Asian miracle. The average annual output growth rate in this region has been at a record high or more than 20 percent for the last decade, so that this area specifically is called the Fifth Dragon. Guangdong is the most notable province in South China and has been a recipient of high FDI flows.

Competition exists among jurisdictions, and this fact coupled with the common market condition now allows for a practice considered disturbing as provinces erect local trade barriers between jurisdictions. Such protectionist practices go against the theory of pure market capitalism and inhibit the ability of China to achieve the full gains of such an economy. At the same time, though, the potential of being put at a competitive disadvantage relative to other jurisdictions prevents the imposition of harsh restrictions on firms (Montinola, Qian, & Weingast, 1995, 58). The common market condition in China has meant a marked improvement in factor mobility, and this is shown by the flow of FDI and the mobility of labor