Regional Diffferences in FDI Inflows: China – India Comparison

An analysis of regional differences in the flow of FDI in China and India is important as in both these countries a few regions account for the bulk of FDI inflows. There are very few studies on regional differences in FDI inflows. This paper makes an attempt to fill this gap. The main finding is that the determinants of regional distribution of FDI flows in China and India are very similar to the pattern influencing inter-country FDI flows, namely, it flows to relatively developed regions. Regions that are poor in physical, institutional and social infrastructure receive very little FDI. These regions do not attract domestic investments either. These findings raise several issues on the question of the role of FDI in economic development in developing countries.