The Opportunities and Challenges of Chinese

Running head: OPPORTUNITIES AND CHALLENGES OF CHINESE FDI IN INDIA
Opportunities and Challenges of Chinese FDI in India
Name of the Student
Name of the University
Author Note

1OPPORTUNITIES AND CHALLENGES OF CHINESE FDI IN INDIA
Abstract
India is emerging as a leading destination in the world today for foreign direct
investment. It has surpassed global economic powers like China and the United States of
America to become to the top most destination in the globe for foreign direct investment today.
FDI is now one of the principal sources of revenue that is boosting economic development in the
country of India. China itself is a country that has been engaging in lucrative trade in India for
quite a few years now, in spite of the complex political and military relationship shared between
the two countries. China has been making heavy investments in Indian enterprises between 2014
and 2017 and is significantly influencing the trade and economic activities in India today. This
assignment prepares a proposal for carrying out a research project that will assess the
opportunities and challenges for FDI in India. The proposal engages in an in-depth literature
review, highlights the research gap, mentions the research questions and objectives that follow
the identification of the research gap, after which the methods of research are mentioned along
with research limitations and ethical considerations.
Keywords – Chinese FDI in India, FDI in India, Foreign Direct Investment, FDI in Brics
Countries, Chinese FDI, Diaspora communities

2OPPORTUNITIES AND CHALLENGES OF CHINESE FDI IN INDIA
Table of Contents
Part 1................................................................................................................................................3
1. Introduction..............................................................................................................................3
2. Review of Literature.................................................................................................................4
3. Identification of Research Gap.................................................................................................9
4. Research Aims and Objectives.................................................................................................9
5. Research Questions..................................................................................................................9
6. Research Hypothesis..............................................................................................................10
Part 2..............................................................................................................................................11
7. Research Methodology...........................................................................................................11
7.1. Data Sampling.................................................................................................................11
7.2. Sample Size.....................................................................................................................11
7.3. Data Collection...............................................................................................................11
Data Analysis.............................................................................................................................12
8. Ethical Considerations for the Research................................................................................12
9. Limitations of the Study.........................................................................................................14
References......................................................................................................................................15

3OPPORTUNITIES AND CHALLENGES OF CHINESE FDI IN INDIA

4OPPORTUNITIES AND CHALLENGES OF CHINESE FDI IN INDIA
Part 1
1. Introduction
Foreign direct investment in the country of India serves as a primary source of revenue
for the nation’s economic development. Global companies are seen to make direct investments in
the fast growing and private business enterprises in India in order to take advantage of the ready
and cheap availability of manpower as well as the continuously transforming business
environment in the country (Venkatraman and Venkatesan 2019). Foreign direct investment has
been taking place in India ever since the country witnessed a period of economic liberalization in
the early part of the decade of the 1990’s (Patra 2019). It was stated by the Financial Times in
the year of 2015 that India has superseded global economic powers such as the United States of
America and China to become the most favored and preferred nation in the world for foreign
direct investment (Sharma 2015). China itself has now become one of the top most foreign
investors in India. China is estimated to have investment as much as two billion dollars in Indian
enterprises in the year of 2017 compared to the seven hundred million that it had invested in the
year of 2016. China is also the largest trading partner that India has at the moment while India
serves as a substantive project contracting market for all China based companies in the region of
South Asia (Gusarova 2019). Against such a backdrop, this assignment prepares a research
proposal for a project that will investigate the opportunities and challenges of Chinese FDI in
India. For this purpose, the proposal engages in an in-depth literature review on the subject
matter, mentions the research questions as well as research aims and objectives, outlines the

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methods of data collection and data analysis that are to be undertaken and concludes by pointing
out all the ethical factors that shall be taken into consideration in order to do this research.
2. Review of Literature
` Kaplinsky and Morris (2016), have carried out research on Chinese foreign direct
investment activities as undertaken in the region of Sub-Saharan Africa. The research focuses on
the engagement of Sub Saharan African with large and state owned Chinese firms that have been
making heavy investments in the infrastructure and resource sectors of Sub Saharan Africa. The
research provides evidence of various types of investment by Chinese firms over here focusing
specifically on the character that is made by state owned firms in China whose investments
happen to be bundled rather closely with trade and aid. The researchers conclude that the
opportunities that are made available through the resource base of Sub Saharan African countries
is something that they should capitalize on by adopting a focused and integrated response to
Chinese investors, who are seeking to benefit from the natural resources of the continent.
Paul and Mas (2015) have conducted research on the emergence of countries like China
and India in the world market. The researchers have reviewed, examined as well as listed all of
the factors which contribute to the emergence of India and China in the international
marketplace. Characteristics of Indian and Chinese investment, antecedents, and the
consequences of this emergence of China and India in the world market have been well studied
by the researchers and in the process they have posited a number of testable and theoretical
propositions concerning future research in this area.
Ye (2016) have examined and compared liberalization of foreign direct investment in
China and in India. It is argued by Ye (2016) that while diffusion studies rightly emphasize

6OPPORTUNITIES AND CHALLENGES OF CHINESE FDI IN INDIA
external resources and ideas that propel the process of liberalization in developing countries,
there are two significant gaps that can be detected in doing so. Firstly, types of diffusers as well
as the manner by which diaspora communities can influence economic liberalization in their
homelands is not something that is covered by the authors. Little attention is also paid to the
process of internal diffusion that takes place after national adoption occurs in a country. The
research undertaken by Ye (2016), explores the conditions of diffusion and utility of diaspora
communities and examines the role of internal diffusion and diaspora in India and China’s FDI
liberalization arguing that while local networks in India did not engage strongly with the Indian
diaspora and vice versa, the entrepreneurial diaspora networks of China did just the opposite,
engaging heavily with local networks in China.
According to Patra (2017), rapid economic growth and urbanization in the era of
globalization is something that has been taking place largely due to substantive flows of FDI or
foreign direct investment. The research undertaken by Patra (2017), analyzes the linkage and
casualty among GDP, foreign direct investment and urbanization in India and China with
assistance from secondary data for the years between 1979 and 2012. The pattern and
determinants of FDI flow into China as well as India have been focused upon and a significant
and positive co-relation has been observed between flow of FDI and urbanization with regard to
specific regions in both India as well as in China.
Sharma (2015) has engaged in a comparative analysis of FDI regimes of China as well as
India. The research shows that the implementation of foreign direct investment appears to be a
matter of concern in India, even though the government of India has been playing an active role
in attracting as much foreign direct investment as possible in recent years. It is stated by Sharma
(2015), that the regulatory environment for foreign direct investment in India is relatively slow

7OPPORTUNITIES AND CHALLENGES OF CHINESE FDI IN INDIA
while China on the other hand has witnessed consistent FDI flows and has allowed for the
smooth implementation of the same in spite of problems such as marked legal reforms and
economic slowdown. It is the belief of Sharma (2015) that India can most definitely learn from
the national investment making policy of China.
Verma (2016) has undertaken research on the role that the Chinese mercantile state has
on a country such as India. The objective of the study is to understand the causes of
mercantilism, its effects and impacts on trade balance in India and the measures that can be
adopted in tackling the problem that is seen to arise in this balance of trade. Both comparative
analysis and content analysis have been made use of by the author to carry out the research. It is
argued by Verma (2016) that Chinese mercantilism had a significant impact on Indian trading
activities and encouraged export of Indian goods to China in a wide range of commodities such
as iron and steel, slag and ash, organics, cotton, chemicals, plastic and ores.
Gusarova (2019) has examined the role that has been played by China in developing trade
as well as FDI cooperation with all the BRICS countries. It is the argument of Gusarova (2019)
that investment cooperation and trade as carried out between China and the BRICS countries is
something that is seen to exert quite a strong influence on development of the economies of the
BRICS countries. Gusarvoa (2019) states, that China is the main investor as well as trading
partner for the BRICS countries and the fact that China is deepening its economic ties with other
BRICS countries is something that is helping it to set up a cushion against the rising problem of
global inequality.
Yingxi and Hung (2018), have studied the relationship between economic growth and
inward FDI in the context of China and India. It is argued by the researchers that FDI has a more

8OPPORTUNITIES AND CHALLENGES OF CHINESE FDI IN INDIA
positive impact on China than it does on India and this is because of two reasons. Firstly, China
has better communication and transportation infrastructure that allows for better business
efficiency and secondly, the high levels of human capital in China implies that Chinese laborers
are able to learn new managerial and technological know-how as introduced by FDI far more
quickly, thus bolstering productivity in China.
Shan et al. (2018) have engaged in a study on how Chinese FDI is being attracted in the
African region. The research examines the effect that market size, natural resources, political
stability, accountability and voice, regulatory quality, absence of violence, control of corruption
and rule of law have on Chinese FDI in the African continent. Regression analysis has been
undertaken on panel data from as many as 22 countries for the years between 2008 and 2014. It
is concluded by the researchers that market size rather than natural resources play an active role
in attracting Chinese FDI in the continent of Africa.
Kang and Zhao (2018), have examined how differences in areas such as economic
freedom and political risk between home and host countries interactions with resource seeking
intent of firms has an influence on the firms choice of location for outward foreign direct
investment. The research has made use of regression analysis to show that location choice for
outward FDI of Chinese firms is a consequence of the fit and the interplay between external
legitimacy of firms in the host country and internal legitimacy of firms under the purview of
multinational organizations.
Venkatraman and Venkatesan (2019) have studied FDI flows into numerous sectors in
India, assessing the impact as well as profitability of FDI flows on the national exchange rate.
Unrelated regression and secondary sources of data were utilized for analyzing currency

9OPPORTUNITIES AND CHALLENGES OF CHINESE FDI IN INDIA
appreciation and foreign flows. It was observed by the researchers that the automobiles sector is
one that is significantly influenced by FDI which in turn had an impact on exchange rate, with as
many as 21 sectors being investigated for the purpose of policy implications. Gupta (2018) has
examined the trends that can be witnessed in FDI or foreign direct investment inflows into the
country of India in the years between 1971 and 2016. Regression analysis was used to determine
numerous economic determinants that have an impact on FDI inflows. It was found that physical
infrastructure, total trade, reserves, exchange rate, external debt and market size are the most
important economic determinations of foreign direct investment inflows into India.
Kumar and Geetha (2018) have examined the make in India policy of the Indian
government, evaluating how this policy has had a vital role to play in attracting foreign direct
investment. It is the argument of the researchers that India has risen from the position of number
15 in 2014 to the position of number 10 in 2015 for foreign direct investment worldwide after the
make in India scheme was introduced in the country in 2014. The opportunities and progress of
FDI as made possible through the make in India program have been well highlighted in this
research. Gaur and Padiya (2017) have also undertaken research on FDI possibilities in India as
brought about by the make in India program. The study has been carried out in the context of
India-China economic relations. The steps taken by the government of China to attract FDI have
been compared with the steps taken by the Indian government for the same, with secondary
sources being used to judge how FDI is being encouraged and attracted in India.
Ventakesan (2018) has studied how foreign direct investment has had a crucial
role to play in changing the lifestyle of the Indian people. One example of this, states the
research is the growth and expansion of the use of automobiles in the country. It is the argument

10OPPORTUNITIES AND CHALLENGES OF CHINESE FDI IN INDIA
of Venkatesan (2018) that FDI serves currently as the most important source of revenue for
funding economic development in India.
3. Identification of Research Gap
The literature that has been reviewed above does a thorough job of pointing how the FDI
activities undertaken by China in the African region as well as in the South Asian region, it
demonstrates the techniques and measures that have been taken by India and China to attract
foreign direct investment by its diaspora communities and by global investors and also analyzes
the impact that FDI inflows have had on both India and China, economically and socially. The
research pays little attention to Chinese foreign direct investment activities in India and does not
mention how lucrative or non-lucrative the prospective of Chinese FDI in India could be. This
particular research gap is what this project now seeks to address.
4. Research Aims and Objectives
The aims and objectives of this research are as follows –
 To determine the factors that influence or encourage Chinese foreign direct investment in
India
 To determine the opportunities associated with Chinese foreign direct investment in India
 To assess the challenges of Chinese foreign direct investment in India, if any
5. Research Questions
The specific research questions that this project looks to answer are as follows –

11OPPORTUNITIES AND CHALLENGES OF CHINESE FDI IN INDIA
 What are the factors that influence or encourage Chinese foreign direct investment in
India?
 What are the opportunities associated with Chinese foreign direct investment in India?
 What are the challenges of Chinese foreign direct investment in India?
6. Research Hypothesis
Hypothesis 1 – Chinese foreign direct investment has a positive impact on Indian economic
growth
Hypothesis 2 – Chinese foreign direct investment has a negative impact on Indian economic
growth

12OPPORTUNITIES AND CHALLENGES OF CHINESE FDI IN INDIA
Part 2
7. Research Methodology
This research will make use of both primary as well as secondary sources of data in order to
arrive at the answers to the research questions (Brannen 2017).
7.1. Data Sampling
The sample for the research will be a random and convenient sample that will be arrived
at using the method of probabilistic sampling. It is a random and convenient sample that is being
selected for this study because of the paucity of time and resources available for the study.
7.2. Sample Size
The size of the sample research population will be kept restricted to 25 participants, again
due to the paucity of time and resources. The research population will comprise of academics,
journalists, policy makers and business owners in India and China.
7.3. Data Collection
It is a quantitative research method that will primarily be deployed in order to carry out
this investigation. The data will be collected through the distribution of an online survey or
questionnaire among the respondents (Brannen 2017). Additionally, qualitative research will also
be carried out, in its primary form by engaging in interviews and focus group discussions with
policy researchers and people working at Think Tanks in India and China. Secondary sources of
information such as books, edited volumes and peer reviewed journal articles on the subject of

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India-China trade will be carried out as well in order to test the hypothesis and arrive at the
answers to the research questions.
Data Analysis
The data that is compiled using primary and secondary methods will be put through a
process of analysis. The quantitative data or responses to the survey questionnaire that is
conducted online will be analyzed using STATA while the qualitative data will be analyzed by
engaging in content analysis and textual analysis and even narrative analysis for this purpose.
Thematic analysis will also be engaged in with the research being divided into various themes or
sub divisions under the broader category of opportunities and challenges of Chinese FDI in
India.
8. Ethical Considerations for the Research
The following ethical factors will be taken into consideration for carrying out this research
 The identity of all the respondents will be kept anonymous unless the respondents are
willing to have their identity revealed in the public domain, once the research is
published.
 The primary purpose and outcome of the research is something that will be made
known to the respondents prior to subjecting them to the survey or interviews and
focus group discussions. Respondents will not be kept in the dark in any way
whatsoever about the purpose and the intent of the research.
 Every effort will be made to keep the questions in the questionnaire as well as those
that are posed during the interviews and the focus group discussions as impersonal as

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possible, so as not to cause any discomfort to the respondents at the time of answering
them.
 If the respondents are not comfortable in taking part in the research process after
having initially agreed to participate in it, then they will have the freedom to opt out
of the investigation whenever they feel the need to do so. Their participation is not
going to be coerced at all.
 All the research findings will be documented and then analyzed and put into words in
original language and style. Duplication of content is something that is going to be
strictly avoided and every effort will be made to keep the content of the research
hundred percent unique and genuine.
 The research interviews and focus group discussions are going to be held at a time
that is considered as convenient for the research participants. The interviews and the
focus group discussions will be scheduled in keeping with the convenience of the
research participants and the duration of the discussions will be kept restricted to one
hour at the most.
 The questions in the online questionnaire will be kept to a minimum of ten to fifteen
questions and will be written in comprehensive English so that respondents find it
easy to understand the questions and to respond to them in the manner desired.
 Audio and video recordings of the interview sessions and focus group discussions are
recordings that will be made only if the respondents give the permission to this end. If
respondents are not comfortable being recorded, then the same will be avoided by the
researcher (Silverman 2016).

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9. Limitations of the Study
This project which investigates the opportunities and challenges of foreign direct investment
in India, while ambitious, could have been carried out with a greater degree of elaboration with
more attention being paid to detail. However, the research is limited by a number of factors
which have compelled it to remain a small scale project. To begin with, the funds that are
available for this research are of a limited nature and cannot fund an investigation that is too long
drawn out. Time is another constraining factor that this research project is faced with. With
greater time and resources at hand, more in-depth investigation on the subject matter may be
undertaken.

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References
Venkatesan, R., 2018. Role of Foreign Direct Investment in India. International Journal of
Advanced Scientific Research & Development (IJASRD), 5(3), pp.411-415
Patra, S., 2019. FDI, urbanization, and economic growth linkages in India and China. In Socio-
Economic Development: Concepts, Methodologies, Tools, and Applications (pp. 313-327). IGI
Global.
Venkataraman, R. and Venkatesan, T., 2019. A study on the impact of FDI policy and the
foreign exchange management in India. International Journal of Public Sector Performance
Management, 5(3-4), pp.531-543.
Gupta, J., 2018, April. Trends and Macro-economic Determinants of FDI Inflows to India.
In International Conference on Advances in Computing and Data Sciences(pp. 346-358).
Springer, Singapore.
Kumar, D.R. and Geetha, R., 2018. FDI Promotions and Advancement through Make in India
Programme.
Shan, S., Lin, Z., Li, Y. and Zeng, Y., 2018. Attracting Chinese FDI in Africa: The role of
natural resources, market size and institutional quality. critical perspectives on international
business, 14(2/3), pp.139-153.
Kang, Y. and Zhao, S., 2018, July. Effects of Institutional Difference and Resource Seeking
Intent on Location Choice of Chinese FDI. In Academy of Management Proceedings (Vol. 2018,
No. 1, p. 15873). Briarcliff Manor, NY 10510: Academy of Management.

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Gusarova, S., 2019. Role of China in the development of trade and FDI cooperation with BRICS
countries. China Economic Review.
Yingxi, M. and Hung, J.H., 2018. Inward FDI and Economic Growth: A Comparative Analysis
of China Versus India. In The State of China’s State Capitalism (pp. 239-262). Palgrave
Macmillan, Singapore.
Verma, K.K., 2016. Impact of Chinese mercantilism state on India. Journal Global Values, 7(2),
pp.1-8
Sharma, A., 2015. A Comparative Analysis of the Chinese and Indian FDI Regimes. Chi.-Kent J.
Int'l & Comp. L., 15, p.1.
Gaur, A.D. and Padiya, J., 2017. Exploring ‘Make in India’Campaign & Emerging FDI trends in
IT& BPM Sector in India. Journal of Business, 1(2), pp.42-57.
Ye, M., 2016. Utility and Conditions of Diffusion by Diasporas: Examining Foreign Direct
Investment Liberalization in China and India. Journal of East Asian Studies, 16(2), pp.261-280
Kaplinsky, R. and Morris, M., 2016. Chinese FDI in Sub-Saharan Africa: Engaging with Large
Dragons. In The Power of the Chinese Dragon (pp. 123-148). Palgrave Macmillan, London
Paul, J. and Mas, E., 2016. The emergence of China and India in the global market. Journal of
East-West Business, 22(1), pp.28-50.
Silverman, D. ed., 2016. Qualitative research. Sage
Brannen, J., 2017. Mixing methods: Qualitative and quantitative research. Routledge.

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