Diasporas and Foreign Direct Investment in China and India

260 Pages·2014·1.866 MB·English

by  Min Ye

DiasporasandForeignDirectInvestmentinChinaandIndia
Thisbookoffersacomparativeandhistoricalanalysisofforeigndirect
investment(FDI)liberalizationinChinaandIndiaandexplainshowthe
returnofthesecountries’diasporasaffectssuchliberalization.Itexam-
ines diasporicinvestment fromWesternFDIs andfinds thatdiasporas,
ratherthanWesternnations,havefueledglobalizationinthetwoAsian
giants.InChina,diasporascontributedthelion’sshareofFDIinflows.In
India, returned diasporas were bridges for, and initiators of, Western
investment at home. Min Ye illustrates that diasporic entrepreneurs
helpedtobuildChinaintotheworld’smanufacturingpowerhouseand
that Indian diasporas facilitated their homeland’s success in software
servicesdevelopment.
Min Ye is an assistant professor of international relations and the
director of the East Asian Studies Program at Boston University. She
has served as a visiting scholar and professor in China, Japan, South
Korea,Singapore,andIndiaandhasgivenlecturesatFudanUniversity,
Zhejiang University, and the Chinese University of Broadcasting and
Mass Media. Her publications include The Making of Northeast Asia
(withKentCalder,2010)andvariousarticlespublishedinsuchjournals
astheJournalofEastAsianStudies,ModernChinaStudies,andChina
Public Affairs Quarterly. In China, Ye also serves as a consultant on
globalization for private and state-run companies and development of
specialzonesinvariouslocalities.

Diasporas and Foreign Direct Investment
in China and India
MIN YE
BostonUniversity
32AvenueoftheAmericas,NewYork,NY 10013-2473,USA
CambridgeUniversityPressispartoftheUniversityofCambridge.
ItfurtherstheUniversity’smissionbydisseminatingknowledgeinthepursuitof
education,learning,andresearchatthehighestinternationallevelsofexcellence.
www.cambridge.org
Informationonthistitle:www.cambridge.org/9781107054196
©MinYe2014
Thispublicationisincopyright.Subjecttostatutoryexception
andtotheprovisionsofrelevantcollectivelicensingagreements,
noreproductionofanypartmaytakeplacewithoutthewritten
permissionofCambridgeUniversityPress.
Firstpublished2014
PrintedintheUnitedStatesofAmerica
AcatalogrecordforthispublicationisavailablefromtheBritishLibrary.
LibraryofCongressCataloginginPublicationData
Ye,Min,1975–
DiasporasandforeigndirectinvestmentinChinaandIndia/MinYe.
pages cm
ISBN978-1-107-05419-6(hardback)
1. Investments,Foreign–China. 2. Investments,Foreign–India. I. Title.
HG5782.Y425 2014
332.67030951–dc23 2013048109
ISBN978-1-107-05419-6Hardback
CambridgeUniversityPresshasnoresponsibilityforthepersistenceoraccuracyof
URLsforexternalorthird-partyInternetWebsitesreferredtointhispublication
anddoesnotguaranteethatanycontentonsuchWebsitesis,orwillremain,
accurateorappropriate.
Tomyparents
YeJianxinandXiaAiyu
forthelivestheyliveandthelifetheygaveme

Contents
ListofIllustrations pageix
ListofAbbreviations xi
Preface xiii
part i. introduction and theory
1. ForeignDirectInvestmentinChinaandIndia 3
DiasporasandSocialNetworkTheory 4
FDIandFDIPoliciesinChinaandIndia 7
PoliticalTheoriesofFDILiberalization 12
ChapterOutlines 18
2. SocialNetworkTheory:Diasporas,DomesticIndustry,
andtheDiffusionofFDILiberalization 20
SNTasaNewPolicyFramework 22
SocialNetworksandDiffusionofFDILiberalization 23
ExternalNetworksandDomesticResistance 28
ComparativeCasesandHypothesizedExplanations 35
EmpiricalMaterials 39
Conclusion 40
part ii. reform stage i
3. DiasporaEntrepreneursandDiffusionofFDILiberalization
inChina 45
TheNewGovernmentandPolicyOptions 48
TheRiseofDiasporaNetworksinPost-MaoChina 51
SpecialEconomicZonesandtheInitiationofFDILiberalization 55
OpenCoastalCitiesOvercameChallengetoFDILiberalization 60
ReassertingFDILiberalizationaftertheTiananmenCrisis 64
Conclusion 67
vii
viii Contents
4. DeregulationwithoutOpennessinIndia 69
IndiaStartedReforminthe1980s 70
IndiraGandhi’sBusinessNetworksandDeregulation 72
RajivGandhi’sDiasporaNetworksandTheirRoleinLiberalization 79
Rajiv’sSocialNetworks:WhyFDILiberalizationFailedtoStay 84
QuietChangeinIndia’sGovernment–BusinessRelations 89
Conclusion 90
part iii. reform stage ii
5. DeepeningDiffusion:“ZoneFever”andSOEReforminChina 95
ExpandingDiasporaNetworks 96
DiasporaInvestmentand“ZoneFever” 99
SOEReformDeepenedFDILiberalization 110
Conclusion 117
6. IndianIndigenousIndustryandFDI 119
ContinualDivergenceinFDIbetweenChinaandIndia 120
Crisis,Reform,andBlowbackinIndia 121
TheEvolvingNewSocialBasisofIndia’sFDILiberalization 132
Conclusion 144
part iv. foreign direct investment in sectors
7. China’sElectronicsandAutomobiles 149
TheElectronicsIndustry:FromSEZstoHigh-TechClusters 152
TheAutoSector:FromProtectionismtoIndustrialPolicy 161
FDIinOtherSectors 174
Conclusion 175
8. FDILiberalizationinIndia’sInformaticsandAutos 177
India’sDiasporaandInformatics 177
IndigenousIndustryandAutoSectorLiberalization 191
OtherSectors:ContinuityorChange 203
Conclusion 204
9. Conclusion:TheState,Diasporas,andDevelopment 205
HistoryandGeography,Networks,andPolicies 206
Regime,StateAutonomy,andEmbeddedness 210
FDIandDiasporaInvestment:AMissingDistinction 212
DiasporaDifferencesandConsequencesacrossChinaandIndia 213
LessonsandTrends 216
Conclusion 218
Bibliography 219
Index 239