FOREIGN DIRECT INVESTMENT OUTFLOWS FROM CHINA AND INDIA

K. C. Fung and Alicia Garcia-Herrero
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K. C. Fung: Department of Economics, University of California, Santa Cruz, CA 95064, USA
Alicia Garcia-Herrero: Banco Bilbao Vizcaya Argentaria (BBVA), Hong Kong Branch, Two International Finance Centre, 8 Finance Street, Central, Hong Kong
Authors registered in the RePEc Author Service: Alicia Garcia Herrero

China Economic Policy Review (CEPR), 2012, vol. 01, issue 01, 1-15

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.

Keywords: Indian outward FDI; Chinese outward FDI; institutions (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (11)

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DOI: 10.1142/S1793969012500033

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