The political regimes in China and India are similar in the way that both currently operate as a market economy, but they also have very many differences. We will examine a number of factors that contribute to the economic and political climates of both countries in comparison with each other. These factors include growth and other economic indicators, foreign direct investment and labour laws. This paper seeks to prove that the Chinese economy provides a more advantageous environment than that of its Indian counterparts for a foreign investor looking to do business and that involvement in the private sector is most beneficial.
Before the aforementioned factors are examined, we will briefly discuss the political regimes of China and India
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Firstly, Inamdar’s 2013 article comparing China and India will be scrutinised. It demonstrates that China fared considerably better than India on a number of fronts including - but not limited to - GDP forecasts, purchasing managers indexes (PMIs), exports, consumer confidence, output growth and currency values for that particular year. Bosworth and Collins (2008) further confirm this, stating that China’s rapid growth has now lasted more than a quarter century. The private sector grew particularly well according to Kumar and Worm (2011) accounting for around 70 percent of China’s GDP in 2005, hence why becoming involved in the Chinese private business sector would be far more preferable to that of the public. Growth has also been observed in China and India’s agricultural, industrial and services industries. As is the trend in information so far, China dwarfs India’s growth in the agriculture and industry sectors with the services sector being the one that comes closest to exceeding that of China. India is also behind China in areas such as education. India lags behind China in lowering the portion of the population with no education and in the literacy rate. Research also found that that India had low rates of return to primary education and a rising rate of return to higher …show more content…
During the last 15 years China has received between US $60-100 billion in FDI projects annually and represent over 4 percent of GDP compared to that of India whose inflows from FDI have been approximately US $5 billion and less than 1 percent of GDP (Bosworth & Collins, 2008). China’s inflows are incredibly extensive to agree that has not been attained by any other developing economy. Cheap labour and a potential huge domestic market have made china he preferred investment destination of foreign companies (Kumar & Worm, 2011). And with all of these FDI, access to global markets is promoted and bring the accumulation of technology and management skills (Bosworth & Collins, 2008). China’s success involving FDI is partly due to the policies surrounding it. Sweeney’s (2010) summarises the differences between Chinese and Indian policy in his article, stating that India’s governance of foreign direct investment more perplexing and more highly regulated than China’s, whose was primarily developed to encourage FDI and promote a sense of transparency for the comfort of foreign investors. India’s confusing policies are considered to be a detriment to their competiveness, with political stability ranked as one of the most serious factors impacting upon it. China, on the other hand is considered the most politically
To begin with, this research exposed a FDI puzzle between India and China through analyzing the current economic condition. Prime, Subrahmanyam and Lin (2011) stated, "Given their growth records, large markets, and reformed economic systems, both China and India appear to be equally likely candidates for foreign direct investment. Yet, China has received substantially more FDI" (p. 303).
C/E/110. FDI in emerging economies: the case of EECThe paper discusses the importance of inbound FDI for emerging economies. Among the considered benefits are economic growth, the growth of internal market, technological sipll -overs and access to cheap managerial know-how. The paper also considers the motivational forces that push and pull investors to stream their capitals into particular destinations and business areas.
I found this article "Foreign direct investment: Companies rush in with the cash" on the financial times website (www.FT.com) published December 11, 2002 written by John Thornhill. The reason for choosing this article is my personal interest in the Chinese economy and its attractiveness to the foreign investors. Apart from the foreign direct investment this topic has also helped me in understanding the impact of Chinese economy on the global market.
Ever since China open its doors to the outside world, it has widely become a fighting space for foreign investors and business to raid in and take advantage of the vulnerable but growing economy, during that period. This has led to China today being one of the highest countries with foreign investments. Before China’s Open Door Policy in 1979, China was in a crucial point in trying to grow its economy. Balancing out the growing population and the need for jobs led to the idea of foreign investors and opening their doors to the rest of the world.
Since China joined the WTO in 2001,which has significantly further opened up the massive Chinese market for foreign investments and trading. China has witnessed a remarkable economic growth and due to its huge population, China has become a major player in the world economy. Furthermore, China has a huge potential consumer market due to a dramatic expansion of the middle class in China (KPMG, 2004). Therefore, China appears to be one of the most attractive markets for many multinational companies (KPMG, 2004). Since 2003, China has become the biggest target country for international investments following by the United States (KPMG, 2004). In addition, China has recently further liberalized the government regulations and restrictions toward foreign business operation in China. These basically allow foreign firms to pursue their preferred entry mode choices. However, the Chinese market is heterogeneous, large, complex and not easily accessible (MOFCOM, 2013). Therefore, the choice of the entry mode is significantly considered as a frontier issue in the international marketing (Root,
Wang, Y. (2013). Fiscal Decentralization, Endogenous Policies, and Foreign Direct Investment: Theory and Evidence From China and India. Journal of Development Economics. 103 pp.107-123.
China is the second major economy in the world and most populated country in the world with well over 1.3 billion people. Simultaneously, India is the second most heavily populated country consisting of 1.1 billion people. Although 1.1 billion people constitute a large amount of purchasing power India continues to have the world’s highest concentration of poor people. In particular, India’s economy consist of agriculture, textiles, chemicals, food processing, steel, transport equipment, and software services (Just the facts, 2006). In this paper I will discuss and compare China and India’s economy, political, out shoring, social issues, educational system, government structure, and infrastructure.
In the year 2007, China and India ranked first and second respectively in the list of ideal foreign direct investment (FDI) destinations, according to A T Kearney, a global strategic management consulting firm (The Press Trust of India Limited, 2007a). The two nations, because of their similarities in geopolitical, economic and demographic aspects, are often compared with each other. To determine which one is more attractive for businesses to expand to, this essay will examine the business environment of both countries from the following perspectives: political/legal, economic, socio-cultural and technological.
China's development is praised by the whole world. Its developments are not only in the economic aspect, but as well in its foreign affairs. Compared with other developed countries, China is a relatively young country. It began constructing itself in 1949. After 30 years of growth, company ownership had experienced unprecedented changes. Entirely, non-state-owned companies can now be more involved in sectors that used to be monopolized by state-owned companies.
Over the years, foreign direct investment (FDI) has become a popular way for countries to move capital flows from one country to the other. Basically, foreign direct investment simply refers to an instant when a business entity for a particular country invests in an income generating asset in another country with a hope of return on the investment. Foreign direct investment has its benefits to the foreign investor, the home country and the host country (Froot 1993, 60). However, it should be noted that the benefits that come about as a result of FDI can only be possible if all the three parties follow the right regulations and the ethical ways of doing business is strictly adhered to. This paper sheds some light on the costs and benefits of FDIs to the investors, the home country and the host country. In addition, it will also review how the country and the firms’ level of development and growth play a role in determining the costs and benefits accrued from the FDIs (Weigel, Wagal & Gregory 1997, 56).
...st and stand in the world. It is predicted that China will one day be the largest economy growing country in world. They continually growing and rebalancing their world to be the best. The growth of economy will depend on the Chinese government comprehensive economic reforms that more quickly accelerate in China transition to a free market economy. The consumer demand, rather than exporting the main engine of economic growth; boost productivity and innovation; address growing income disparities; and enhance environmental. (Morrison, 2014,para2)
The country that this essay will use as a case study is India. India is interesting because the country has become FDI-intensive in recent years, following its economic liberalisation in the early 1990s. Prior to this, the India economy had strict controls and regulation on foreign capital and foreign ownership. Foreign Direct Investment (FDI) was particularly targeted in these reforms in order to benefit from the inflow of capital and other assets such as technology and knowledge. Since the liberalisation of the FDI policy, India has experienced a massive increase in FDI inflow (see figure 1). The services sector and the computer software and hardware sector have received the largest shares of FDI inflows, followed by telecommunications, transportation, fuels and chemical sectors (figure 2).
Figure 1 shows the recent trends in FDI inflows of some developing countries. According to the UNCTAD report of 2011 China has the highest FDI inflows among all the developing countries like Hong Kong, Russia, Singapore, Brazil and India; because China has introduced FDI over 20 years ago and has progressively pursued foreign investment while adjusting its FDI policies. Since 1993, China has attracted the largest amount of FDI of all developing countries while increasing its levels of both exports and technological advancement
The growth of U.S. investments in India has increased, but the country still remains a small destination for foreign U.S. investors. So, we know that U.S. views India as a growing nation compared to U.S. foreign investors so, the U.S. is considered a significant source of FDI in India. However, there are things that might increase the importance of India for U.S. firms looking for foreign investment opportunities. The multinationals firms in U.S. facing increased labor costs can invest in India due to its large, well-educated and English speaking workforce. India and U.S. share about their economic and trade issues and both are members of WTO, IMF and World Bank.
Moreover, China is the best example for how important is the government’s role in nations economy. Chinese government have created national team to focus on specific sectors such as electronics and automobile. (Sutherland,2003). As a result of this strategy, China became the biggest automobile manufacturer in the world by the end of 2012. Also, Chinese government is very successful to control financial markets and it owns 3 of top 10 banks in the world. On the other hand, in another growing state, India, government is applying different strategy rather than Chinese government that is based over encouraging foreign direct investments into the state by lowering tariffs. Eventually India has joined the top ten automobile manufacturers in the world and net profit of the companies has slightly increased by the end of this process (Sardy and Fetscherin, 2009)