Comparative Study of Fdi Flow to India and China
Volume III, Issue 2, September 2007 © 2007, Journal of Asia Entrepreneurship and Sustainability No reproduction or storage, in part or in full, permitted without prior permission. Editors@asiaentrepreneurshipjournal.com
COMPARATIVE ANALYSIS OF FDI IN CHINA AND INDIA
Dr. Swapna S. Sinha swapnassinha@yahoo.com Dr. David H. Kent dkent@ggu.edu Dr. Hamid Shomali hshomali@ggu.edu Ageno School of Business Golden Gate University 536 Mission St. San Francisco, CA 94105 Tel: 415-442-6500
Abstract Some emerging markets have been leaders in the world and have grown at a higher rate benefiting from higher Foreign Direct Investments (FDI) by Trans National Corporations (TNCs) and some have been laggards and have not able to attract as much FDI and grow that efficiently. Why China gets 60 billion dollars FDI annually as compared to India that does not even get 6 billion dollars is an intriguing question? This dissertation explores the determinants of FDI in such emerging economies to answer the above question. What has India done till now to attract FDI? What has been China’s strategy to become the most FDI attracting country in the world? What lessons India can learn from China and improve its FDI inflow? The study attempts to theorize what lessons emerging markets that are laggards in attracting FDI, such as India, can learn from leader countries in attracting FDI, such as China in the global economy. This study fills the gap in the literature by analyzing the Indian data at the relevant micro state level for the period 1992-2005 and comparing it with the Chinese data for period of 1978-2005 at the relevant economic zone level. Indian FDI attraction model was tested using OLS and autoregressive models and it was found that India has grown due to its human capital, size of the market, rate of growth of the market, and political stability. For China, congenial business climate factors comprising of making structural changes, creating strategic infrastructure at SEZs, and
COMPARATIVE ANALYSIS OF FDI IN CHINA AND INDIA
Dr. Swapna S. Sinha swapnassinha@yahoo.com Dr. David H. Kent dkent@ggu.edu Dr. Hamid Shomali hshomali@ggu.edu Ageno School of Business Golden Gate University 536 Mission St. San Francisco, CA 94105 Tel: 415-442-6500
Abstract Some emerging markets have been leaders in the world and have grown at a higher rate benefiting from higher Foreign Direct Investments (FDI) by Trans National Corporations (TNCs) and some have been laggards and have not able to attract as much FDI and grow that efficiently. Why China gets 60 billion dollars FDI annually as compared to India that does not even get 6 billion dollars is an intriguing question? This dissertation explores the determinants of FDI in such emerging economies to answer the above question. What has India done till now to attract FDI? What has been China’s strategy to become the most FDI attracting country in the world? What lessons India can learn from China and improve its FDI inflow? The study attempts to theorize what lessons emerging markets that are laggards in attracting FDI, such as India, can learn from leader countries in attracting FDI, such as China in the global economy. This study fills the gap in the literature by analyzing the Indian data at the relevant micro state level for the period 1992-2005 and comparing it with the Chinese data for period of 1978-2005 at the relevant economic zone level. Indian FDI attraction model was tested using OLS and autoregressive models and it was found that India has grown due to its human capital, size of the market, rate of growth of the market, and political stability. For China, congenial business climate factors comprising of making structural changes, creating strategic infrastructure at SEZs, and