Institutional Distances and Economic Engagement Between India and China

Santosh Pai and Aravind Yelery
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Santosh Pai: Partner, D.H. Law Associates santoshkpai@gmail.com
Aravind Yelery: Associate Fellow, Institute of Chinese Studies aravind.yelery@gmail.com

China Report, 2017, vol. 53, issue 2, 214-231

Abstract: This article argues that bridging institutional distance is a reliable method to increase the flow of Chinese investments into India. India’s growing economy and ability to attract investments from China meets most of the conditions that can be considered attractive for investments from China. This is complemented by China also fulfilling many of the criteria as a source of foreign direct investment (FDI) into India. China is a major trading partner of India but the Indian economy remains highly deficient in Chinese investment which undermines reciprocity in economic affairs. The possible reasons for underinvestment by Chinese enterprises in India are partly associated with the lack of sufficient interactions between institutions of both the countries, which in turn creates ‘institutional distances’ impacting economic affairs. This article attempts to throw light on these issues from theoretical and behavioural perspectives. Apart from instances of ‘institutional differences’, the article will also attempt to address how select ministries in China and India function while dealing with each other on a case by case basis.

Keywords: Institutional distances; investment; FDI; bilateral agreements; regulatory policies (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:sae:chnrpt:v:53:y:2017:i:2:p:214-231

DOI: 10.1177/0009445517696641

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