Why China Can Attract More FDI: A Response to "Competitiveness in India and China: the FDI puzzle"

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Why China Can Attract More FDI:

A Response to "Competitiveness in India and China: the FDI puzzle"

In 2008, a serious financial crisis swept the globe, causing many countries' economies sunk in depression or recession. After four years, some emerging economies, such as China and India which are the members of the "BRICS" (the acronym of Brazil, Russia, India and China, which are at a similar stage of newly advanced economic development), firstly got rid of the effect of this financial crisis. Therefore, these emerging economies begin to draw more economists' attention. Prime, Subrahmanyam and Lin researched the competitiveness in India and China through the foreign direct investment (FDI). In " Competitiveness in India and China: the FDI puzzle", Prime, Subrahmanyam and Lin (2011) applied the Porter's diamond theory to illustrate, the FDI puzzle, why China can attract substantially more FDI, although China and India have many similar factors (pp. 303-333). Though I strongly agree with their research because my experience in China confirms it, I still insist that they didn't provide ample evidence to support the result of this research. After summarizing their research paper, I will supplement evidence into the result from three aspects: related and supporting industries, government, and chance.

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).

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