Comparative Study Of Outward FDI Between China And India

Outward foreign direct investment is an important way to participate in theinternational division of labor, playing an important role in the economic development.The global outward foreign direct investment is growing rapidly, especially indeveloping economies. As two important developing economies, China and India areplaying an important role in the world economy. Both of them are developingcountries with a large population, and they have many similarities, so they arecomparable. Investment scales in both countries keep expanding, but they havedifferences in sector and geographical distribution, types of investors and investmentmethods. India has advantages in sector and geographical distribution and types ofinvestment. India’s investment in high-tech industries and in developed countries isgrowing rapidly. Besides, private enterprises are playing an important role in theinvestment. Thus, we can learn some experience from India’s foreign directinvestment practice and policy.China’s outward foreign direct investment has made great achievement, withinvestment flows and stock growing rapidly. However, it far falls behind developedcountries in overall scale. It has some other problems: the outward foreign directinvestment is not properly distributed, as it is focused on some certain countries orregions; the share of private enterprises is small; the investment performance is a bitpoor. Comparing the features and economic impact of the two countries’ outwardforeign direct investment, we can summarize the advantages of India and then we cangive suggestions to the development of china’s foreign direct investment. Chinesegovernment should intensify the policy support for outward foreign direct investmentand guide the enterprises to adjust the sector distribution; government and enterprisesshould work together to cultivate international talents; multinational companiesshould make use of their comparative advantage; the investment performance shouldbe improved. So we can see that it is meaningful to compare the foreign direct investment between China and India.This paper is based on the above background and method. It is divided into sixparts. The first chapter introduces the background of the study and tells why it isworth doing research. It also introduces the literature review, the method, theinnovation and limitation of the paper. Chapter two summarizes the basic theories ofoutward foreign direct investment, including the traditional theories and theories thatexplain why developing countries are also involved in the outward investment.Chapter three compares the history, geographical distribution, sector distribution,types of investment between China and India and summarizes their common pointsand differences. In chapter four, first the paper analyzes the investment developmentpath by using Dunning’s theory of investment development path. Then it analyzes theinvestment performance of the two countries. At last, it uses the Eviews to analyze therelationship between outward foreign direct investment and economic development.According to the above analysis, chapter five will give some suggestions to improvethe development of Chinese outward foreign direct investment: the governmentshould take measures to support it, such as policy support and financial support; weshould adjust the sector and geographical distribution to promote the upgrading ofindustrial structure; Enterprises should investigate the investment environment beforethey invest and they should not expand globally blindly.