Impact of inward FDI on the host country´s capability development of investment abroad: Experience from China and India

This paper focuses on the core issue that "whether FDI inflow will play a catalytic role in the host country\´s outward FDI". We select two big developing countries China and India, using an extended IDP model to have an empirical test. The result shows that, the original logic of IDP theory is established for both countries, that is, the level of economic development is an important factor that affects host country\´s capability of outward investment; while in terms of inward FDI\´s direct impact on outward investment capability China and India are different. According to the test, China\´s inward FDI does not have significant direct effect on its outward FDI; while the inward FDI in India does for the country.