China and India in the Age of Globalization

Abstract

In recent years, China and India have extensively liberalized their economies. They have departed from the East Asian developmental states, which have restricted foreign direct investment (FDI) to protect domestic industry, and the liberal FDI strategy of Latin America during a similar stage of development as they have eschewed dependent development. Instead, they have taken a “liberalization two-step,” which follows liberalization with reregulation that varies across industrial sectors. Country and sectoral case studies demonstrate the perceived strategic value of a sector, sectoral characteristics, and the organization of state institutions shape the ways in which reregulation varies. Insulated from political pressures, the Chinese state shifts from universal controls on the aggregate level to selective controls at the sectoral level and adopts a bifurcated strategy in its reregulation. In India, the government liberalizes FDI according to state goals but reregulates as a function of sectoral interests arising from the legacy of its postindependence economic strategy.