FDI Policies in China and India: Evidence from Firm Surveys

15 Pages Posted: 19 Jan 2012

See all articles by Yasheng Huang

Yasheng Huang

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Heiwai Tang

Johns Hopkins University - Paul H. Nitze School of Advanced International Studies (SAIS); The University of Hong Kong - Faculty of Business and Economics; CESIfo; Kiel Institute for the World Economy

Date Written: January 2012

Abstract

This paper builds on the idea that economic reforms in China were designed to attract foreign direct investment (FDI), while the opposite happened in India. We empirically examine how these different reform approaches affect foreign‐invested enterprises’ (FIE) and domestic firms’ perceptions about the host country’s business environment. Using World Bank survey data, we find that FIEs in India perceive more obstacles to business operations and development relative to domestic firms, especially on issues related to government regulations and legal institutions. On the contrary, FIEs in China find government officials more helpful in promoting business development and perceive legal and financial constraints similar to their domestic counterparts. These differences in perceptions between firm ownership types are consistent with the underlying diverging approaches of FDI policies adopted by the two largest developing nations.

Suggested Citation

Huang, Yasheng and Tang, Heiwai, FDI Policies in China and India: Evidence from Firm Surveys (January 2012). The World Economy, Vol. 35, Issue 1, pp. 91-105, 2012, Available at SSRN: https://ssrn.com/abstract=1987933 or http://dx.doi.org/10.1111/j.1467-9701.2011.01387.x

Yasheng Huang (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

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Heiwai Tang

Johns Hopkins University - Paul H. Nitze School of Advanced International Studies (SAIS) ( email )

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The University of Hong Kong - Faculty of Business and Economics ( email )

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