Academic journal article Journal of East Asian Studies

Utility and Conditions of Diffusion by Diasporas: Examining Foreign Direct Investment Liberalization in China and India

Academic journal article Journal of East Asian Studies

Utility and Conditions of Diffusion by Diasporas: Examining Foreign Direct Investment Liberalization in China and India

Article excerpt

Abstract

Diffusion studies have rightly emphasized external ideas and resources that propel liberalization in the developing world. There remain two gaps: first, the literature has not covered the types of diffusers and the ways diasporas may shape liberalization in their homelands; second, it pays little attention to internal diffusion after national adoption within a country. This article explores the utility and conditions of diffusion by diasporas and examines the roles of diasporas and internal diffusion in China and India's FDI liberalization. In both countries, diasporas were main diffusers that led national adoption of liberalism at home. In China, however, entrepreneurial diasporas' networks with local governments helped expansive internal diffusion. India's professional diasporas did not strongly engage local governments or domestic companies. National adoption in India was followed by reversal and partial internal diffusions. India's software services provide a similar diffusion by diasporas to that in China.

Keywords

diffusion by diasporas, policy networks, China, India, Foreign Direct Investment

INTRODUCTION

During China's economic reform, there were millions of overseas Chinese (OCs) in capitalist societies; Hong Kong, Taiwan, and countries in Southeast Asia. (1) Many were financiers, developers, manufacturers, and exporters. Since 1978, diaspora entrepreneurs had returned home with ideas and resources that helped China implement pro-FDI policy. The other Asian giant, India, likewise had millions of people living abroad. Large shares of non-resident Indians (NRIs) were in South Asia and the Gulf region. Others had emerged as successful professionals with education and work experiences in the advanced societies. Professionals have been returning to India and influencing its economic reform since the 1980s. Their direct impacts on FDI were more limited than Chinese diasporas in the PRC. In short, Chinese and Indian diasporas have shaped the initiation, implementation, and consequences of FDI in their respective homelands, albeit in different ways.

Diffusion studies in international political economy (IPE), which emphasize the importance of external ideas and resources to a country's adoption of liberal policies, have not incorporated the roles of diasporas. Instead, they center on the influence of IOs, MNCs, and other actors via mechanisms of coercion, competition, emulation, and learning (Simmons, Dobbin, and Garrett 2006, 2008). Furthermore, existing diffusion studies end their exploration of a nation's liberal adoption at the national level and do not cover internal diffusion of liberalism after national adoption. It is indeed the internal diffusion that distinguishes successful liberalizations from less successful ones. And during the internal diffusion stage, diasporas that share ethnicity and social norms with domestic actors can play critical roles in their homeland's liberal transformation.

In this article, I explore the utility and conditions of diffusion by diasporas and apply the framework to FDI liberalization in China and India. I offer three findings: First, there is sufficient evidence to argue that diffusion by diasporas provides a novel and complementary mechanism for understanding the varied liberal adoption in China and India. Second, FDI liberalization in both countries was not implemented simply by a "strike of the pen," but required compliance or further actions on the part of those at lower levels of government. Third, certain conditions made diasporas during the internal diffusion more effective in China than India, while similar conditions were present in India's software services sector and resulted in similarly expansive diffusion in this sector.

DIFFUSION, INTERNAL DIFFUSION, AND DIFFUSION BY DIASPORAS

IPE scholars have emphasized the impacts of major powers, international organizations (IOs), and multinational corporations (MNCs) on global spread of economic liberalism. …

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