Inward FDI and economic growth: A comparative analysis of China versus India

Ma Yingxi; Juann H. Hung

doi:10.1007/978-981-13-0983-0_10

Inward FDI and economic growth: A comparative analysis of China versus India

Ma Yingxi, Juann H. Hung^*

^*Corresponding author for this work

Department of Economics

Xi'an Jiaotong-Liverpool University

Research output: Chapter in Book or Report/Conference proceeding › Chapter › peer-review

3 Citations (Scopus)

Abstract

What makes foreign direct investment (FDI) inflows more beneficial to economic growth in China than in most other developing countries? This chapter aims to shed light on this question by conducting an analytical review of the literature with a focus on comparing FDI’s estimated effect on growth in China versus that in India. Our literature review indicates FDI inflows have positively affected economic growth in both China and India, but that this positive impact was larger in China than in India. Our analysis suggests that there are two key reasons for this difference. First, China has better transportation and communication infrastructure, therefore better business efficiency. Second, China’s higher level of human capital means Chinese employees learn new technology and managerial know-how brought in by FDI more quickly, speeding up the spillover of technology and improving productivity rapidly in China.

Original language	English
Title of host publication	The State of China's State Capitalism
Subtitle of host publication	Evidence of Its Successes and Pitfalls
Publisher	Palgrave Macmillan
Pages	239-262
Number of pages	24
ISBN (Electronic)	9789811309830
ISBN (Print)	9789811309823
DOIs	https://doi.org/10.1007/978-981-13-0983-0_10
Publication status	Published - 1 Jan 2018

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title = "Inward FDI and economic growth: A comparative analysis of China versus India",

abstract = "What makes foreign direct investment (FDI) inflows more beneficial to economic growth in China than in most other developing countries? This chapter aims to shed light on this question by conducting an analytical review of the literature with a focus on comparing FDI{\textquoteright}s estimated effect on growth in China versus that in India. Our literature review indicates FDI inflows have positively affected economic growth in both China and India, but that this positive impact was larger in China than in India. Our analysis suggests that there are two key reasons for this difference. First, China has better transportation and communication infrastructure, therefore better business efficiency. Second, China{\textquoteright}s higher level of human capital means Chinese employees learn new technology and managerial know-how brought in by FDI more quickly, speeding up the spillover of technology and improving productivity rapidly in China.",

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N2 - What makes foreign direct investment (FDI) inflows more beneficial to economic growth in China than in most other developing countries? This chapter aims to shed light on this question by conducting an analytical review of the literature with a focus on comparing FDI’s estimated effect on growth in China versus that in India. Our literature review indicates FDI inflows have positively affected economic growth in both China and India, but that this positive impact was larger in China than in India. Our analysis suggests that there are two key reasons for this difference. First, China has better transportation and communication infrastructure, therefore better business efficiency. Second, China’s higher level of human capital means Chinese employees learn new technology and managerial know-how brought in by FDI more quickly, speeding up the spillover of technology and improving productivity rapidly in China.

AB - What makes foreign direct investment (FDI) inflows more beneficial to economic growth in China than in most other developing countries? This chapter aims to shed light on this question by conducting an analytical review of the literature with a focus on comparing FDI’s estimated effect on growth in China versus that in India. Our literature review indicates FDI inflows have positively affected economic growth in both China and India, but that this positive impact was larger in China than in India. Our analysis suggests that there are two key reasons for this difference. First, China has better transportation and communication infrastructure, therefore better business efficiency. Second, China’s higher level of human capital means Chinese employees learn new technology and managerial know-how brought in by FDI more quickly, speeding up the spillover of technology and improving productivity rapidly in China.

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Inward FDI and economic growth: A comparative analysis of China versus India

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