Why there may be greater potential for FDI activity in China rather Essay

Why there may be greater possible for FDI drill in China rather than India - Essay Exampletheories therefore inform that FDIs may be attracted to India as a result of its relatively lower labour costs, lower political risks and its closer proximity to developed OECD states. China on the other hand, may conjure up to FDIs as a result of its swelled consumer market and its more impressive trade with developed OECD countries.3This paper conducts a comparative analysis of FDI appeal in India and China with a view to demonstrating that there may be greater potential for FDI activity in China rather than India. In order to demonstrate the greater potential for FDI activity in China, this paper analyses TNC theories and the determinants of FDI inflows and outflows and examines these determinants in the context of India and Chinas economy. This paper is therefore divided into three decomposes. The premier(prenominal) part of this paper provides an analysis of TNC theories and the dete rminants of FDIs. The second part of this paper examines Indias economy and the final part of this paper examines Chinas economy.Since the 1960s several theories of TNC have emerged helping to explain the factors that weigh in favour of or against TNCs investing abroad.4 Traditional neoclassical supposition usually represented by eclectic or OLI theories (ownership, localization and internalization advantages) are typically used to explain and predict the determinants of FDI.5 The eclectic opening arose out of J. Markusens reconceptualization of John Dunnings neoclassical possibility of investment and trade. Dunnings neoclassical theory takes the position that FDIs are selected by TNCs as a result of a combinations of transport costs, factor endowments and rural size.6Eclectic theory explains why a company would elect FDI as opposed to producing topically and exporting locally produced goods abroad and where the TNC would most likely direct its FDI. In this regard, Dunnings ecle ctic theory identifies the why, where and when/how decisions in terms of ownership,