ABSTRACT
This chapter focuses on one salient difference between the capital globalization of China and India—their relative openness to foreign direct investment (FDI)—and provides a historical institutional analysis of this divergence. It observes that different capitalist institutions are rooted in the two Asian giants’ divergent socialist construction, and furthermore, their divergent capitalist experiences are embedded in political institutions forged in the previous period, including local government activism and an ideational preference for FDI as a means of domestic development. The local government-FDI coalition has played an important role in China’s industrialization and globalization and is likely to shape future trajectories as well. In India, by contrast, the socialist construction and capitalist transition have reinforced the roles of central bureaucracies and indigenous big business. These two sets of powerful actors have shaped India’s globalization in the last decades, which has been more skeptical of FDI inflows than in China.
