Comparable Analysis In Impacts Of China’s And India’s OFDI On Domestic Industrial Upgrading

The impact of the global financial crisis has not yet dispeared, outward foreign direct investment (OFDI) has regained momentum and is considered as an important way to promote home country’s industrial upgrading. Twelfth Five Year Plan clearly states the importance of implementing the "Going Out" strategy and regards the industrial upgrading as the main development goal. In the academic field, the industrial upgrading effect of outward foreign direct investment has been a widespread concern. While, those studies are mostly based on the OFDI activities carried out by developed economies. In order to promote the positive impact of China’s OFDI activities for home country’s industrial upgrading, learning the successful experience of other developing countries is particularly crucial.India is a large developing country with the similar political, economic and social background with China. The period of India’s OFDI development is also similar. This paper conducts a detailed comparison between the development history, industrial distribution, location characteristics, performance index and industrial development of China and India. From the comparison study, it is found that the two countries OFDI mode and industrial structure are very different. China forms a manufacturing-oriented OFDI, and the largest domestic industry is the second industry. However, India is focus on OFDI in services, and domestic industrial structure is also focused on the tertiary industry. Thus, consistency of OFDI and domestic industrial structure is showed.Based on existing researches and cases of foreign direct investment, the mechanism of OFDI’s home industrial upgrading is explained from a macro and micro perspective. The macro perspective is focused on the three pathways, which are different industrial transfer, the related upstream and downstream industries and intra-industry competition within the industry, to promote industrial upgrading. And on micro perspective, different motivation for industrialization, investment income, factor transformation, labor productivity and technological level can effect industrial upgrading. On the basis of analysis of the mechanisms, the use of Grey Relational Analysis and Gray Model prediction analysis prove the strongest relationship currently of industrial upgrading in China and India are technology-seeking OFDI and market-seeking OFDI. For example, information transmission, computer services and software, high value services are technology-seeking OFDI and wholesale and retail, manufacturing and traditional services are market-seeking OFDI. Resource-seeking OFDI also plays an important role for its strategic significance. By predicting the next five years, OFDI in information technology services, wholesale and retail, transportation and other traditional services will continue the strong correlation of industrial upgrading in home country. Given all the analysis, some policy suggestions are presented from optimizing OFDI industrial distribution, geographical distribution and the role of government perspectives.