A Panel Data Analysis of Locational Determinants of Chinese and Indian Outward Foreign Direct Investment
Journal of Asia Business Studies, Vol. 3, No. 2, 2009
34 Pages Posted: 28 Nov 2009 Last revised: 14 May 2014
Date Written: June 16, 2008
The upsurge of Chinese and Indian outward foreign direct investment (FDI) raises an unanswered question about locational determinants of direct investment from the two countries. Using an unbalanced bilateral FDI database, we find that Chinese and Indian FDI are attracted to countries with large market size, low GDP growth, high volumes of imports from China or India, and low corporate tax rates. We also find important differences between China and India. While Chinese FDI is drawn to countries with open economic regimes, depreciated host currencies, better institutional environments, and English speaking status, none of these factors are important for Indian FDI. Chinese FDI is also deterred by geographic distance and OCED membership. However, neither of these has any impact on Indian FDI.
Keywords: Outward Foreign Direct investment, China, India
JEL Classification: F21, O53
Suggested Citation: Suggested Citation