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Institutional Distances and Economic Engagement Between India and China

Author

Listed:
  • Santosh Pai

    (Partner, D.H. Law Associates santoshkpai@gmail.com)

  • Aravind Yelery

    (Associate Fellow, Institute of Chinese Studies aravind.yelery@gmail.com)

Abstract

This article argues that bridging institutional distance is a reliable method to increase the flow of Chinese investments into India. India’s growing economy and ability to attract investments from China meets most of the conditions that can be considered attractive for investments from China. This is complemented by China also fulfilling many of the criteria as a source of foreign direct investment (FDI) into India. China is a major trading partner of India but the Indian economy remains highly deficient in Chinese investment which undermines reciprocity in economic affairs. The possible reasons for underinvestment by Chinese enterprises in India are partly associated with the lack of sufficient interactions between institutions of both the countries, which in turn creates ‘institutional distances’ impacting economic affairs. This article attempts to throw light on these issues from theoretical and behavioural perspectives. Apart from instances of ‘institutional differences’, the article will also attempt to address how select ministries in China and India function while dealing with each other on a case by case basis.

Suggested Citation

  • Santosh Pai & Aravind Yelery, 2017. "Institutional Distances and Economic Engagement Between India and China," China Report, , vol. 53(2), pages 214-231, May.
    • Handle: RePEc:sae:chnrpt:v:53:y:2017:i:2:p:214-231
    DOI: 10.1177/0009445517696641
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    References listed on IDEAS

    as
    1. John Child & Sek Hong Ng & Christine Wong, 2002. "Psychic Distance and Internationalization: Evidence from Hong Kong Firms," International Studies of Management & Organization, Taylor & Francis Journals, vol. 32(1), pages 36-56, January.
    2. Peter J Buckley & L Jeremy Clegg & Adam R Cross & Xin Liu & Hinrich Voss & Ping Zheng, 2007. "The determinants of Chinese outward foreign direct investment," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 38(4), pages 499-518, July.
    3. Basant, Rakesh & Saha, Subhendra Nath, 2005. "Determinants of Entry in the Indian Manufacturing Sector," IIMA Working Papers WP2005-01-01, Indian Institute of Management Ahmedabad, Research and Publication Department.
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