FOREIGN DIRECT INVESTMENT OUTFLOWS FROM CHINA AND INDIA

K. C. Fung · Alicia Garcı́a-Herrero

32 citations0/0 files storedChina Economic Policy Review

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International Business and FDI Global Financial Crisis and Policies International Arbitration and Investment Law

Abstract

In this paper, we examine the determinants of Indian and Chinese FDI outflows. There are three sets of results. First, Chinese investment is attracted tomore corruptcountries, while India is attracted to economies with better rule of law. Further analysis suggests that our result of China investing in more corrupt destinations is mostly driven by Chinese investment in the sub-sample of African countries. While we do not conduct economic welfare analysis, several studies in the literature reported that China's investment in Africa contributed to increased Asia–Africa trade and narrowing of the infrastructure deficits of the sub-Saharan African economies. Second, Chinese FDI is going to economies which are larger but poorer. Indian FDI is going to smaller but richer host countries. Lastly, both India and China seem to be investing in economies to seek fuels. There is also some evidence that they are investing to acquire technology. Exchange rates do not play a major role in affecting Indian or Chinese investment.

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References

2001The Colonial Origins of Comparative Development: An Empirical Investigation 1997How Taxing is Corruption on International Investors?2000The Colonial Origins of Comparative Development: An Empirical Investigation 2007The determinants of Chinese outward foreign direct investment 2007A knowledge-and-physical-capital model of international trade flows, foreign direct investment, and multinational enterprises 2008Building Bridges: China's Growing Role as Infrastructure Financier for Sub-Saharan Africa 2006Is China's FDI coming at the expense of other countries?2009The Empirics of China's Outward Direct Investment

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