Advantages and Disadvantages of FDI in China and India

Tarun Kanti Bose

doi:10.5539/ibr.v5n5p164

Abstract

This study was directed towards detecting the positive and negative sides for the foreign investors while they go for direct investment in India and China. A descriptive and explorative research study has been carried out for investigating the current proposition of the concerned case of FDI in those two countries. Advantages of investing in India includes-Huge market size and a fast developing economy, availability of diversified resources and cheap labour force, increasing improvement of infrastructure, public private partnerships, IT revolution and English literacy, openness towards FDI, regulatory framework, and investment protection, where as few drawbacks likes huge section of poor and middle class, bureaucracy, power shortage and ethnic diversified are also available in the country. As far as the case of China is concern positives areas are the immense size and growth of the Chinese economy and very bright prospects, resource availability and low cost of labour force, immense development in relevant infrastructure, openness to international trade and easy access to international markets, development and alteration of the regulatory framework, investment protection and promotion. There are also few drawbacks as well like the regulator burden, hindrances in free flow of information, lack of English literacy and so on.

Highlights

In this 21ST century globalization makes this planet as a global village and people of different countries are getting closer and closer (Dunning, 2002)
As a result foreign direct investment (FDI) is getting accelerated at a faster rate and different countries of the world are trying their best to attract more and more FDI as it proves to be a great force for triggering the domestic economic development. (Chang & Rosenzweig, 2001; Chung, 2001; Daisuke, 2008)
While the large Multi National Corporations of the West are getting advantages of market expansion from FDI, the host countries are utilizing it as a major mechanism and source for accelerating their domestic economic growth

Summary

Introduction

In this 21ST century globalization makes this planet as a global village and people of different countries are getting closer and closer (Dunning, 2002). Due to immense development of technologies investors of different countries are looking forward to find business opportunities beyond the conventional territory and as a result one of the most popular and highlighted terms in modern business-“FDI” is evolving at a greater pace than ever before (Birkinshaw, 2000; Alfaro et al, 2004). In this era of globalization and intense competition, foreign direct investment (FDI) has become a very common and immensely important phenomenon for consumers, producers and different governments (Balasubramanyan et al, 1996; Borensztein et al, 1995). There is little doubt on the fact that while a large company from the US or Europe consider about going into diversified operation across the globe-first thing came into their market is the size of the market

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Conclusion