China and India Acquiring Resources in the World

Introduction

Global economy has witnessed a significant change in the last two decades. Developing economies has taken over global business lead. The Outward Foreign Direct Investment (OFDI) has been a phenomenon of developed economies (Banga, 2006). Until 1980’s more than 90% of the FDI came from developed countries (WIR 2005). Greater participation of firms from emerging markets in global trade and their increasing mergers and acquisition in different countries, showed marked increase in OFDI (Arthreye and Kapur 2009). OFDI from emerging economies rose from US$6 billion in 1991 to US$225 billion in 2007 (Hong). Outward FDI from EMNE’s reached US$ 388 billion by 2010 with an increase of 21% from 2009 (WIR, 2011). China and India are the leading developing economies, with OFDI from China in 2008 reached to US$ 52 billion, 97% increase from 2007, while FDI outflows from India was US$ 18.8 billion in 2008 (Hong). According to World Investment Report (2009), there were 21,000 MNE’s, out of which 3,500 were Chinese and 2104 were Indian MNE’s (Hong 2011). This paper focuses on the factors responsible for OFDI from India and China and will see whether it is in the form of backward or forward integration with the application of related theories of Dunning’s OLI and IDP and we will see if any other theory explains this outward FDI trend.

INDIA

OFDI from India gained momentum in 1990’s especially after 2000, the number of approved project in 1991 was 220, which reached to 395 in 2000, and in 2008 the number of projects reached to 1,595 (Kumar, 2008). In early 1990’s, the FDI outflow from India was estimated to $0.2 billion, which reached to almost $14 billion in 2007. The Indian share in total developing economies outward FDI was below 0.5 per cent through the 90s, but after that it started rising and reached up to 6% in 2007 (Athukorala, 2009)

Outward FDI activity of Indian enterprises in the pre-1990 period was largely concentrated in developing...