Final answer:
Currency exchange regulations in China can be a negative factor for foreign investment as they may restrict the flow of profits and complicate financial transactions. A balanced approach with strategic regulations and oversight is needed to attract foreign investment while avoiding financial instability.
Step-by-step explanation:
In the context of foreign investment in China, c) Currency exchange regulations could be a potential negative factor. While a stable political environment, a transparent legal system, and favorable tax incentives are often seen as encouraging conditions for investment, restrictive currency exchange regulations can deter foreign companies from investing. Such regulations might impede the ability to repatriate profits or could introduce complexities in financial transactions that increase operational costs and risks for foreign investors.
A developing country seeking to attract foreign investment while mitigating risks like capital flight and banking system collapse, as experienced during the Asian financial crisis, should offer a balanced environment with strategic regulation, investment incentives, and robust financial oversight. This is a delicate balance to maintain in order to foster an attractive investment climate without compromising financial stability.