Outward foreign direct investment : the challenge of emerging superpowers!

Financial and economic liberalisation has facilitated China and India's drive to move gradually to secure their position as rising economic powers in the global context. China has been maintaining double-digit average annual economic growth over the last two decades; however, India has not fallen far behind. The domestic economic activities have slowed down moderately in recent years, but their aspiration for expanding their economic and financial ventures abroad is quite impressive. The countries are heterogeneous in terms of timing of their policy reforms and strategies of achieving the goal of becoming significant economic power; however, both the countries have accumulated a huge foreign reserve over the years of their economic heights and have significant levels of mergers and acquisitions abroad to pronounce their global presence. Since these two emerging nations have taken the advantage of the financial and economic liberalisation to enhance their economic performance to the full extent, this paper attempts to investigate the major determinants of outward foreign direct investment (OFDI) from China India using cointegration and Vector Error Correction Model over 1970 and 2012. The objective of the paper is to examine the financial and economic liberalisation along with domestic socioeconomic and institutional determinants of OFDI of China and India. We intend to use Granger causality test for possible endogenous relationship between trade and investment liberalisation and OFDI for this two countries.