| With the speedup of the economic globalization and the vigorous development of multinational companies, foreign direct investment has become the main force of economic development. Especially for developing countries, foreign direct investment plays a huge role for their economic growth. In the fierce competition to attract foreign capital, China and India also have most magic power to foreign direct investment. As the most developing countries, China and India have many resemblance. So it has great practical significance in a comparative study of these two countries'performance in utilizing foreign direct investment.In this paper, the author has collected a large amount of data, and analyzes the difference between China and India in absorbing foreign direct investment, and puts forward suggestions for China about the strategy of absorbing foreign direct investment.The paper is divided into five parts:PartⅠ, Introduction. This chapter analyzes the background, the content and the methods of this paper. In the study of domestic and foreign scholars, China and India have different performance in utilizing foreign direct investment. Most scholars believe that although the scale of India's current foreign direct investment can't be compared with China, but the efficiency of utilization of foreign investment in India is higher than in China. Summing up experiences and achievements of our predecessors, the article selects economic growth, foreign trade, industrial restructuring, employment creation and economic security to research.PartⅡ, the theory of foreign direct investment and economic development. This chapter overviews some related economics theories about foreign direct investment and economic growth. Most scholars affirm the positive role of the foreign direct investment for economic development, so the foreign direct investment can promote economic growth, promote the foreign trade development, and affect the host country's industrial upgrading and employment increase, which provides a theoretical support for the author to select such indicators.Part III, the comparative analysis of foreign direct investment situation between China and India. This chapter bases a large number of data, and compares four areas to show the use of differences in foreign direct investment between China and India, including absorption of size, growth rate, the use of structures, performance indicators. The results show that China's foreign direct investment total inflows and performance index are far more than India, but India has a faster growing rate, a richer source of foreign capital and a more rational use than China.PartⅣ, the empirical analysis of the foreign direct investment performance between China and India. This chapter emphasizes on the relations for foreign direct investment and economic growth, economic structure and economic security in these two countries. First of all, this paper uses statistical data from 1991 to 2007 in China and India, to test the short term effects and long term effects of foreign direct investment on economic growth. The conclusion is that foreign direct investment promotes China's and India's economic growth, but the effect is different:China's economic growth mainly depends on the short term demand effect, while the India's economic growth mainly depends on long term supply effect. Second, this paper analyzes the different effects of foreign direct investment and the economic structure between the two countries. The empirical results show that the influence of foreign direct investment on China's import and export trade, industrial upgrading and employment increase is much higher than India, this is because the different paths to development and evolution of model. Finally, the study analyzes the different effects of foreign direct investment and the economic security between the two countries. The fundamental purpose of transnational corporations is to achieve most interests, so the foreign direct investment concerns their own long term development. It will inevitably produce the negative effect of economic security. From the results of the comparison, we know that the negative effects of foreign direct investment in India is less than in China.PartⅤ, the conclusion of this paper. China and India have different impacts on the economy by utilizing foreign direct investment, therefore China should learn experiences from India, in order to promote better use of China's foreign direct investment. First, this paper suggests that China should attract more direct investment from developed countries, and correctly guide the flow of foreign direct investment in the industry. Second, China should focus on the quality of foreign capital, and improve efficiency in the use of foreign direct investment. Third, China should reduce or cancel preferential policies for foreign capital, and create a fair competitive environment and space for the development of national enterprises. Finally, China should establish a sound and complete financial system and legal system.Paper's main contribution is to make a more comprehensive empirical analysis for the performance of foreign direct investment between India and China. Although domestic scholars have used empirical methods to compare China and India, but most concentrated on the study of current foreign direct investment and economic growth or foreign trade, only a few documents research the related data of lag period. Involving the empirical analysis of foreign direct investment and industrial upgrading or employment growth between China and India, there is little to see.As the theoretical level of the individual is limited, some analysis of the problem in this paper seem inadequate. For example, the author only use a simple linear regression analysis; and not involve in other aspects, such as capital formation, technological progress; while not take into account the combination of foreign direct investment and human capital, so the results of empirical model may underestimate the promotion the foreign direct investment in India's economy. |
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