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Foreign Direct Investment Outflows From China And India

Author

Listed:
  • 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)

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.

Suggested Citation

  • K. C. Fung & Alicia Garcia-Herrero, 2012. "Foreign Direct Investment Outflows From China And India," China Economic Policy Review (CEPR), World Scientific Publishing Co. Pte. Ltd., vol. 1(01), pages 1-15.
    • Handle: RePEc:wsi:ceprxx:v:01:y:2012:i:01:n:s1793969012500033
    DOI: 10.1142/S1793969012500033
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    References listed on IDEAS

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    1. Yin‐Wong Cheung & Xingwang Qian, 2009. "Empirics Of China'S Outward Direct Investment," Pacific Economic Review, Wiley Blackwell, vol. 14(3), pages 312-341, August.
    2. Harry X. Wu, 2007. "The Chinese GDP Growth Rate Puzzle: How Fast Has the Chinese Economy Grown?," Asian Economic Papers, MIT Press, vol. 6(1), pages 1-23, Winter.
    3. Harry G. Broadman, 2007. "Africa's Silk Road : China and India's New Economic Frontier," World Bank Publications - Books, The World Bank Group, number 7186, December.
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    Cited by:

    1. Fung, Kwok-chiu & García Herrero, Alicia & Seade, Jesús, 2015. "Beyond minerals: China-Latin American Trans-Pacific supply chain," BOFIT Policy Briefs 5/2015, Bank of Finland Institute for Emerging Economies (BOFIT).
    2. Wladimir Andreff, 2015. "Maturing Strategies Of Russian Multinational Companies: Comparisons With Chinese Multinationals," Post-Print halshs-01287431, HAL.
    3. Amsalu K. Addis & Simplice Asongu & Zhu Zuping & Hailu Kendie Addis & Eshetu Shifaw, 2020. "Chinese and Indian investment in Ethiopia: infrastructure for ‘debt-trap diplomacy’ exchange and the land grabbing approach," International Journal of Emerging Markets, Emerald Group Publishing Limited, vol. 16(6), pages 998-1025, June.
    4. Amar Iqbal Anwar & Mazhar Mughal, 2012. "Economic Freedom and Indian Outward Foreign Direct Investment: An Empirical Analysis," Economics Bulletin, AccessEcon, vol. 32(4), pages 2991-3007.
    5. Bartels, Frank L. & Napolitano, Francesco & Tissi, Nicola E., 2014. "FDI in Sub-Saharan Africa: A longitudinal perspective on location-specific factors (2003–2010)," International Business Review, Elsevier, vol. 23(3), pages 516-529.
    6. Alicia Garcia-Herrero & Sumedh Deorukhkar, 2014. "What explains India s surge in outward direct investment?," Working Papers 1416, BBVA Bank, Economic Research Department.
    7. Bhatnagar, Ankur, 2021. "What drives Indian Non-SOE FDI into Africa?," African Journal of Economic Review, African Journal of Economic Review, vol. 9(4), September.
    8. Godwin Okafor & Obiajulu Ede, 2023. "Kidnapping rate and capital flight: Empirical evidence from developing countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(3), pages 2590-2606, July.
    9. Abdulkadir Wahab AMAN & Zeynep KAPLAN, 2017. "The distribution and determinants of Turkey’s FDI positions in Africa," Turkish Economic Review, KSP Journals, vol. 4(4), pages 400-413, December.

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