China and India: Any difference in their FDI performances? by Wenhui Wei, Journal of Asian Economics, Volume 16, Issue 4, August 2005, Pages 719–736
Abstract
This study aims to explore the determinants of inward FDI in China and India and the causes for their huge difference. I first used random-effect models to analyze separately the determinants of FDI from OECD countries in China and India, and then applied the Oaxaca-Blinder decomposition to examine the causes of the differences. It was found that China’s much higher FDI from OECD countries was mainly due to its larger domestic market and higher international trade ties with OECD countries. India, however, had advantage in its cheaper labor cost, lower country risk, geographic closeness to OECD countries, and cultural similarity.