What is foreign direct investment (FDI)?

Foreign direct investment (FDI) refers to an investment made by a company or individual in one country in business interests or assets located in another country. This type of investment typically involves establishing a business operation or acquiring assets in the foreign country, thus allowing the investor to have a significant degree of control over the foreign business venture.

FDI is characterized by a long-term interest in, and a lasting influence on, the foreign business rather than just a financial transaction. This distinguishes it from other forms of investment, such as acquiring stocks or bonds, which do not necessarily provide control over foreign enterprises.

The other options represent distinct concepts that do not accurately define FDI. For instance, investments limited to domestic markets, government grants, and financial instruments like stocks and bonds do not encompass the comprehensive nature of foreign direct investment, which involves cross-border business operations and management control. Understanding FDI is crucial for recognizing how multinational corporations operate and contribute to global economic integration.