International Business Research
Vol. 5, No. 5; May 2012
Advantages and Disadvantages of FDI in China and India
Tarun Kanti Bose (Corresponding author) Assistant Professor, Business Administration Discipline, Khulna University Khulna 9208, Bangladesh Tel: 880-1911-451-044 Received: February 25, 2012 doi:10.5539/ibr.v5n5p164 Abstract This study was directed towards detecting the positive and negative sides for the foreign investors while they go for direct investment in India and China. A descriptive and explorative research study has been carried out for investigating the current proposition of the concerned case of FDI in those two countries. Advantages of investing in India includes-Huge market size and a fast developing economy, availability of diversified resources and cheap labour force, increasing improvement of infrastructure, public private partnerships, IT revolution and English literacy, openness towards FDI, regulatory framework, and investment protection, where as few drawbacks likes huge section of poor and middle class, bureaucracy, power shortage and ethnic diversified are also available in the country. As far as the case of China is concern positives areas are the immense size and growth of the Chinese economy and very bright prospects, resource availability and low cost of labour force, immense development in relevant infrastructure, openness to international trade and easy access to international markets, development and alteration of the regulatory framework, investment protection and promotion. There are also few drawbacks as well like the regulator burden, hindrances in free flow of information, lack of English literacy and so on. Keywords: FDI, India, China, Positives and negatives, International trade 1. Introduction In this 21ST century globalization makes this planet as a global village and people of different countries are getting closer and closer (Dunning, 2002). Due to immense development of technologies investors of different countries are looking forward to find business opportunities beyond the conventional territory and as a result one of the most popular and highlighted terms in modern business-“FDI” is evolving at a greater pace than ever before (Birkinshaw, 2000; Alfaro et al., 2004). In this era of globalization and intense competition, foreign direct investment (FDI) has become a very common and immensely important phenomenon for consumers, producers and different governments (Balasubramanyan et al., 1996; Borensztein et al., 1995). In this 21ST century, business and trade become more competitive and diversified than ever before. As traditional market is shrinking down in a faster pace, operators are looking for options for expansion and international trade is getting accelerated. As a result FDI is getting accelerated at a faster rate and different countries of the world are trying their best to attract more and more FDI as it proves to be a great force for triggering the domestic economic development. (Chang & Rosenzweig, 2001; Chung, 2001; Daisuke, 2008). While the large Multi National Corporations of the West are getting advantages of market expansion from FDI, the host countries are also utilizing it as a major mechanism and source for accelerating their domestic economic growth. Several research works are taking place over the years in the field of FDI and the suitability and attractiveness of various destinations. There is little doubt on the fact that while a large company from the US or Europe consider about going into diversified operation across the globe-first thing came into their market is the size of the market. It is always essential for attracting the foreign investors as it is the prime consideration prior to invest their money into foreign countries. When we just talk about size of the market-the name of two countries immediately came into our mind. Those countries are certainly India and China. The most populated and huge countries of the...