¹ The list of articles analyzing the different aspects of the two economies is very long. For China, see Chow, Gregory C., “Capital Formation and Economic Growth in China” Quarterly Journal of Economics 108(3) (1993) 809 CrossRefGoogle Scholar; Chow, Gregory C. & Li, Kui-Wai, “China's Economic Growth: 1952-2010” Economic Development & Cultural Change 51(1) (2002) 247 CrossRefGoogle Scholar; Heytens, & Zebregs, , “How Fast can China Grow?” in Rodlauer, Markus & Tseng, Wanda, China: Competing in the Global Economy (Washington, DC: International Monetary Fund, 2003) at 8 Google Scholar; Gilboy, George J., “The Myth Behind China's Miracle” Foreign Affairs 83(4) (2004) 33 CrossRefGoogle Scholar. For India, see Ahluwalia, Montek S., “Economic Reforms in India Since 1991: Has Gradualism Worked?” Journal of Economic Perspectives 16(3) (2002) 67 CrossRefGoogle Scholar; Lewis, William W., The Power of Productivity: Wealth, Poverty, and the Threat to Global Stability (Chicago: University of Chicago Press, 2004)CrossRefGoogle Scholar; For recent comparative work, see Cowen, David & Tseng, Wanda, India's and China's Recent Experience with Reform and Growth (New York: Palgrave Macmillan, 2005)Google Scholar; Nagaraj, R., “Industrial growth in China and India. A Preliminary Comparison” Economic and Political Weekly 40(21) (2005) 2163 Google Scholar; Huang, Y., “What China Could Learn from India's Low and Quiet Rise” Financial Times (27 January 2006)Google Scholar; Kulkarni, Kishore G. & Prime, Penelope B., Economic Development in India and China: New Perspectives on Progress and Change (New Delhi: Serials Publications, 2007) [Kulkarni & Prime]Google Scholar.

² Indian real GDP growth rate was about 8% from 2002 to 2006 and 9.2% in 2007, and is expected to reach 8.5% in 2008 despite the global financial crisis. Chinese GDP enjoyed double-digit annual growth from 2001 to 2008. Source: Central Intelligence Agency The World Factbook 2008.

³ China formally adopted an open-door policy in 1979, while India took the same initiatives from 1992.

⁴ For a review of China's venture capital history, see Lu, H., Tan, Y. & Chen, GM., “Venture Capital and Law in China” (2007) 37(1) Hong Kong, L.J. 229 [Lu et al.]Google Scholar. For India, see Dossani, Rafiq & Kenney, Martin, “Creating an Environment for Venture Capital in India” World Development 30(2) (2002) 227 [Dossani & Kenney]CrossRefGoogle Scholar; Deva, S., “Foreign Venture Capital Investment: The Indian experience” The International Lawyer 42(1) (2008) 177–192 Google Scholar.

⁵ Lu et al., ibid. See also Pruthi, S., Wright, M. & Lockett, A., “Do Foreign and Domestic Venture Capital Firms Differ in Their Monitoring of Investees?” Asia Pacific Journal of Management 20(2) (2003) 177 CrossRefGoogle Scholar.

⁶ Burke, M., Cutshaw, K.A. & Krishna, R., “The Legal Systems in India and China: A Comparative Perspective” Indian Journal of Economics and Business (September 2006)Google Scholar; U. Haley & G.T. Haley, “The Indian Elephant and the Chinese Dragon: Differing Development Strategies of India and China and Effects on Business Environments” in Kulkarni & Prime, supra note 1.

⁷ Porta, Rafael la et al., “Law and Finance” Journal of Political Economy 106(6) (1998) 1113 [la Porta et al.]CrossRefGoogle Scholar.

⁸ Dossani & Kenney, supra note 4. See also Wei, Wenhui, “China and India: Any Difference in their FDI Performances?” Journal of Asian Economics 16(4) (2005) 719 [Wei]CrossRefGoogle Scholar.

⁹ Xing, Yuqing, “Why is China so Attractive for FDI? The Role of Exchange Rates” China Economic Review 17(2) (2006) 198 [Xing]CrossRefGoogle Scholar.

¹⁰ Teagarden, Mary B., Meyer, Joab & Jones, Dupre, “Knowledge Sharing Among High-Tech MNCs in China and India: Invisible Barriers, Best Practices and Next Steps” Organizational Dynamics 37(2) (2008) 190 CrossRefGoogle Scholar.

¹¹ Black, Bernard S. & Gilson, Ronald J., “Venture Capital and the Structure of Capital Markets: Banks versus Stock Markets” Journal of Financial Economics 47(3) (1998) 243 at 245 Google Scholar. Alternatively, venture capital has also been defined as “a professionally managed pool of capital that is invested in equity-linked securities of private ventures at various stages in their development.” See Sahlman, William A., “The Structure and Governance of Venture-Capital Organizations” Journal of Financial Economics 27(2) (1990) 473 CrossRefGoogle Scholar.

¹² Milhaupt, C.J., “The Market for Innovation in the United States and Japan: Venture Capital and the Comparative Corporate Governance Debate” (1997) 91 Northwestern University Law Review 865 at 874 [Milhaupt]Google Scholar (citing a Congressional report finding “the venture capital community [to be] a vital link in the process of capital formation, technological changes, and economic growth”). See also Sahlman, William A., “Insights from the Venture Capital Model of Project Governance” Business Economics 29(3) (1994) 35 Google Scholar (crediting VC with creating some of the most successful companies in the US).

¹³ For a thorough review of Silicon Valley's success, see generally Kenney, Martin, Understanding Silicon Valley: the Anatomy of an Entrepreneurial Region (California: Stanford University Press, 2000)Google Scholar.

¹⁴ See Milhaupt, supra note 12 at 874.

¹⁵ Wei, supra note 8 at 724.

¹⁶ According to the AVCJ database, <http://www.avcj.com/Research_Database.aspx>, from January 1993 to December 2008, the total amount of China-dedicated foreign venture capital fund from all countries is US$39,299 million, while India-dedicated foreign venture capital fund from all countries is US$35,528 million. For China, there are 1,721 disclosed deals with a total investment amount of US$56,609 million. For India, there are 1,453 disclosed deals with a total investment amount of US$44,030 million.

¹⁷ Reynolds, Taylor et al., “Networking for Foreign Direct Investment: The telecommunications Industry and its Effect on Investment” Information Economics and Policy 16(2) (2004) 159 CrossRefGoogle Scholar.

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¹⁹ Wei, supra note 8.

²⁰ Giulietti, M., McCorriston, S. & Osborne, P., “Foreign Direct Investment in the UK: Evidence from a Disaggregated Panel of the UK Food Sector” Applied Economics 36(7) (2004) 653 CrossRefGoogle Scholar.

²¹ Dees, Stephane, “The Opening Policy in China: Simulations of a Macroeconometric Model” Journal of Policy Modeling 23(4) (2001) 397 CrossRefGoogle Scholar.

²² Xing, supra note 9.

²³ E.g. see Wei, supra note 8. See also Felipe, Jesus, Laviña, Editha, & Fan, Emma Xiaoqin, “The Diverging Patterns of Profitability, Investment and Growth of China and India During 1980-2003” World Development 36(5) (2008) 741 CrossRefGoogle Scholar; Sinha, Kent & Somali, , “Comparative Analysis of FDI in China and India” Journal of Asia Entrepreneurship and Sustainability (September 2007)Google Scholar.

²⁴ la Porta et al., supra note 7. See also Porta, Rafael La et al., “Investor Protection and Corporate Governance” Journal of Financial Economics 58(1-2) (2000) 3 CrossRefGoogle Scholar.

²⁵ Ibid.

²⁶ Kaplan, Steven N., Martel, Frederic & Strömberg, Per, “How do Legal Differences and Experience Affect Financial Contracts?” Journal of Financial Intermediation 16(3) (2007) 273 CrossRefGoogle Scholar. See also Lu, Qing, Hwang, Peter & Clement, K. Wang, “Agency Risk Control through Reprisal” Journal of Business Venturing 21 (2006) 369 (arguing that institutional enforcement becomes important when formal means such as legal enforcement are ineffective)CrossRefGoogle Scholar.

²⁷ Dossani & Kenny, supra note 4.

²⁸ Sachdev, R., “Comparing the Legal Foundations of Foreign Direct Investment in India and China: Law and the Rule of Law in the Indian Foreign Direct Investment Context” (2006) Colum. Bus. L. Rev. 167 Google Scholar.

²⁹ Armour, John & Lele, Priya, “Law, Finance and Politics: The Case of India” (2008) available at http://ssrn.com/abstract=1116608 [Armour & Lele]Google Scholar.

³⁰ The writers attributed the mixed results to factors such as the existence of large informal financing channels and the divergent corporate governance systems in China, etc. See Franklin, Allen, Jun, Qian & Meijun, Qian, “Law, Finance, and Economic Growth in China” (2004) University of Pennsivania, Institution for Law & Economics Research Paper No. 03-21 online: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=365641 Google Scholar.

³¹ Lu et al., supra note 4.

³² Maffry, A., “Direct Versus Portfolio Investment in the Balance of Payments” The American Economic Review 44(2) (1954) 614 Google Scholar.

³³ Direct investments are entrepreneurial investments which involve significant elements of ownership, control and management. Portfolio investments are, on the other hand, investments which do not involve important elements of control or management. Maffry, ibid. at 614.

³⁴ International Monetary Fund, Balance of Payments Manual (1980) para. 480. See also Dunning, J.H., Explaining International Production (London: Unwin Hyman, 1988)Google Scholar.

³⁵ Gifford, Sharon, “Limited Attention and the Role of the Venture Capitalist” Journal of Business Venturing 12(6) (1997) 459 CrossRefGoogle Scholar. Though traditional literature shows that western VC typically play an active role in monitoring and adding value to its investee, the evidence from emerging economies (such as China and India) generally shows that foreign VC's influences on its investee in emerging economies are minimal, and such influences are more at a strategic than operational level. For India, see Pruthi et al., supra note 5. For China, see Bruton, G. D. & Ahlstrom, D., “An Institutional View of China's Venture Capital Industry: Explaining the Differences between China and the West” Journal of Business Venturing 18(2) (2003) 233 CrossRefGoogle Scholar.

³⁶ Li, Shaomin, “Why a Poor Governance Environment does not Deter Foreign Direct Investment: The case of China and its Implications for Investment Protection” Business Horizons 48(4) (2005) 297 CrossRefGoogle Scholar.

³⁷ The GEI index is developed by Li and Filer (2004) based on data from the IMF, World Bank, Freedom House, Transparency International, Reporters without Borders, and academic literature. The GEI consists of five components: political right, rule of law, public trust, free flow of information and the level of corruption. See Li, S. & Filer, L., “Governance Environment and Mode of Investment” (Paper presented at the Academy of International Business Annual Meeting, Stockholm, Sweden, 10-13 July 2004)Google Scholar.

³⁸ Li explains this phenomenon by suggesting that when faced with a poor governance environment, investors prefer direct investment to portfolio investment because the former can be better protected by private means. On the other hand, in a rule-based governance environment, characterized by the presence of an independent judiciary, fair and transparent laws impartially enforced, reliable public financial information and high public trust, investors place much trust in the legal system and its enforcement mechanism to reduce their costs. As a result, they prefer investment modes that do not require extensive participation in the operation of the company, such as portfolio investment.

³⁹ International Monetary Fund, International Financial Statistics (Washington, DC: International Monetary Fund, 2003)Google Scholar.

⁴⁰ Sachdev, supra note 28.

⁴¹ Income Tax Law for Enterprises with Foreign Investment and Foreign Enterprises (1991), Art 8.

⁴² It was not until the promulgation of Enterprise Income Tax Law (2007) that starting from January 2008 the income tax for both domestic and FIEs was unified at 25%: Enterprise Income Tax Law (2007), Art 4.

⁴³ Tung, Samuel & Cho, Stella, “The Impact of Tax Incentives on Foreign Direct Investment in China” Journal of International Accounting, Auditing and Taxation 9(2) (2000)105 CrossRefGoogle Scholar.

⁴⁴ Wei, supra note 8 at 724.

⁴⁵ Though in recent years survey results have shown that the procedures for starting a new business in India have been eased and improved, although the cost of starting a new business has also risen to 70% of income per capita. See World Bank's “Doing Business Project” Measuring Legal Hurdles and Business Regulations, online: www.doingbusiness.org.

⁴⁶ Sachdev, supra note 28, at 213-214.

⁴⁷ See, e.g. the case of the Guangzhou Yamei Polyurethane Co. Ltd. (1992) where the Guangzhou municipality exceeded its authority in approving the establishment of a Sino-foreign equity joint venture in the pollution intensive industry. The State Council held that the Guangzhou municipality was wrong to approve the project because it was an investment of over US$30 million. However, since a joint venture contract has been signed, the State Council decided to uphold the proposal and ordered the joint venture contract to be re-signed and re-approved pursuant to the relevant appropriate procedures.

⁴⁸ Mehta, Pratap Bhanu, The Burden of Democracy (India, Penguin Books, 2003), p. 149 Google Scholar.

⁴⁹ Khanna, Tarun, Billions of Entrepreneurs: How China and India are Reshaping their Futures--and Yours, Masssachusetts: Harvard Business School Press, 2007) at 22 [Khanna]Google Scholar.

⁵⁰ According to Jitendra Singh, a Wharton management professor who is currently dean of the Nanyang Business School in Singapore, the issue is broader than how it will impact Tata's ability to deliver a $2,500 car. (Tata Group intended to produced the world's cheapest car that is sold for only US$2,500 in West Bengal) “While India has made a great deal of progress and the economy is doing well, the weak leg continues to be its political system,” see “West Bengal's Nano Impasse: A Roadblock for Tata - and for Investment” 18 September 2008 in India Knowledge@Wharton, online: http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4318.

⁵¹ Raman, J., “A Comparison of Economic Reform Experience in China and India” in Kulkarni & Prime, supra note 1.

⁵² Ahlstrom, David, Bruton, Garry & Yeh, Kuang, “Venture Capital in China: Past, Present, and Future” Asia Pacific Journal of Management 24(3) (2007) 247 CrossRefGoogle Scholar.

⁵³ See Armour, J., “Law, Finance and Innovation” in McCahery, J.A. & Renneboog, L., Venture Capital Contracting and the Valuation of Hi-Tech Firms (Oxford: OUP, 2003) [Armour]Google Scholar; Armour, J., “The Legal Road to Replicating Silicon Valley” ESRC Centre for Business Research, University of Cambridge Working Paper No. 281 (2004) [Armour (2004)]Google Scholar.

⁵⁴ See Milhaupt, supra note 12 at 868.

⁵⁵ Baygan, G. & Freudenberg, M., “The Internationalisation of Venture Capital Activity in OECD Countries: Implications for Measurement and Policy” OECD Science, Technology and Industry Working Paper DSTI/DOC(2000)7, online: <http://www.oecd.org/LongAbstract/0,2546,en_2649_33703_1909473_1_1_1_1,00.html>, at 33 CrossRefGoogle Scholar.

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⁵⁷ Keuschnigg, C. & Nielsen, S.B., “Public Policy for Venture Capital” International Tax and Public Finance 8 (2001) 557 Google Scholar.

⁵⁸ See Armour (2004), supra note 53. See also Keuschnigg, C. & Nielsen, S.B., “Tax Policy, Venture Capital and Entrepreneurship” Journal of Public Economics 87(1) (2003)175 CrossRefGoogle Scholar; Keuschnigg, C. & Nielsen, S.B., “Start-ups, Venture Capitalists and the Capital Gains Tax” Journal of Public Economics 88(5) (2004) 1011 CrossRefGoogle Scholar.

⁵⁹ Jeng, L.A. & Wells, P.C., “The Determinants of Venture Capital Funding: Evidence Across Countries” Journal of Corporate Finance 6 (2000) 241 [Jeng & Wells]CrossRefGoogle Scholar; Allen, F. & Song, W.L., “Venture Capital and Corporate Governance” Wharton Financial Institutions Center Working Paper 03-05 (2003)Google Scholar; Lerner, J. and Schoar, A., 2005, “Private Equity in the Developing World: the Determinants of Transaction Structure,” Quarterly Journal of Economics 120, 223–246 Google Scholar.

⁶⁰ Gompers, P.A. & Lerner, J., The Venture Capital Cycle (Cambridge: MIT Press, 1999) at 58 [Gompers & Lerner]Google Scholar.

⁶¹ EVCA, “Benchmarking European Tax and Legal Environments: Indicators of Tax and Legal Environments Favouring the Development of Private Equity and Venture Capital and Entrepreneurship in Europe” Benchmark Paper, (2004) online: <http://www.planotecnologico.pt/document/benchmarking_european_tax_legal_environmt.pdf> >Google Scholar.

⁶² For subsequent empirical literature that refers to the EVCA index, see Bernard, Guilhon & Sandra, Montchaud, “The Dynamics of Venture Capital Industry” International Journal of Technology Management 34(1) (2006) 148 Google Scholar. Da, Rin Marco, Giovanna, Nicodano & Alessandro, Sembenelli, “Public Policy and the Creation of Active Venture Capital Markets” Journal of Public Economics 90 (2006) 1699 Google Scholar; Petit, Pascal & Quéré, Michel, “The ‘Industrialisation’ of Venture Capital: New Challenges for Intermediation Issues” International Journal of Technology Management 34(1/2) (2006) 126 CrossRefGoogle Scholar.

⁶³ See Milhaupt, supra note 12 at 880.

⁶⁴ When the SEBI considers an FVCI application, it reviews, amongst other factors, the applicant's track record, professional competence, financial soundness, experience, general reputation, whether the applicant is regulated by an appropriate foreign regulatory authority or is an income tax payer.

⁶⁵ The Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Amendment) Regulations 2000 state that the FVCI may acquire by purchase or otherwise or sell shares / convertible debentures / units or any other investments at a price that is acceptable to the buyer and the seller.

⁶⁶ CSRC, Rules for the Establishment of Foreign Invested Securities Companies (2007).

⁶⁷ Source from SEBI: <http://www.sebi.gov.in/Index.jsp?contentDisp=Department&dep_id=3>, last accessed 10 June 2008.

⁶⁸ Source from AVCJ database, online: http://www.avcj.com/Research Database.aspx.

⁶⁹ Amihud, Y. & Mendelson, H., “Asset Pricing and the Bid-Ask Spread” Journal of Financial Economics 17 (1986) 223 CrossRefGoogle Scholar. Brennan, M.J. & Subrahmanyam, A., “Market Microstructure and Asset Pricing: On the Compensation for Illiquidity in Stock Returns” Journal of Financial Economics 41(3) (1996) 441 CrossRefGoogle Scholar.

⁷⁰ See Venture Economics Research Report, “Exiting Venture Capital Investments” (Wellesley: Venture Economics, 1988) at 5–6 (listing six commonly used methods of exiting portfolio companies)Google Scholar.

⁷¹ Ibid. at 7.

⁷² Jeng & Wells, supra note 59; Gompers & Lerner, supra note 60; Mayer, C., Schoors, K. & Yafeh, Y., “Sources of Funds and Investment Activities of Venture Capital Funds: Evidence from Germany, Israel, Japan and the UK” Journal of Corporate Finance 11 (2005) 586 CrossRefGoogle Scholar; Lerner, J., “Boom and Bust in the Venture Capital Industry and the Impact on Innovation” Federal Reserve Bank of Atlanta Economic Review 4 (2002) 25 Google Scholar.

⁷³ Dossani & Kenney, supra note 4.

⁷⁴ Even in Europe, until the creation of new stock markets in the mid-1990s, it was extremely difficult to list small high-technology firms. See Posner, E., “Is There a Revolution in European Venture Capital?” Berkeley Roundtable on the International Economy Conference, Paper No.4, (2000) University of California, Berkeley, CA Google Scholar.

⁷⁵ Currently, stock market investments by foreign institutional investors are over US$50 billion. Moreover, the major domestic stock exchanges, which function as watchdogs for listing, are also open to foreign investment. In 2007, the BSE sold a minority equity stake to Deutsche Börse as part of its strategy to revamp itself, following the NASDAQ's alliance with the NSE. The increase in the limit for FDI in the stock exchanges to 49% announced in early 2007 is expected to lend more dynamism to the equity capital markets. Since the investment limit for a single investor was set at 5%, it did not take long after the new limit was announced that the NYSE, Goldman Sachs, General Atlantic and Softbank Asian Infrastructure Fund each acquired a 5% stake in the NSE. Increased foreign presence is expected to help the NSE to inch forward to the global markets, generate a wider customer and investor base and offer more innovative products.

⁷⁶ As one of the measures to allow greater capital account convertibility, the Reserve Bank of India has allowed two-way fungibility for Indian ADRs / GDRs. This allows holders of the instruments to cancel them with the depository and sell the underlying shares in the market. The company can then issue ADRs anew to the extent of the shares converted into local shares. According to a 2007 research by Deutsche Bank, this RBI initiative further linked domestic stock markets to international investors and strengthened domestic firms’ ability to access capital abroad. Deutsche Bank Research Report (2007), online: <http://www.db.com/spain/content/downloads/DB_Research_Current_Issues_070214.pdf>.

⁷⁷ The Securities Law of People's Republic of China (2005), Art. 50. It requires a company issuing public shares in China to have China Securities Regulatory Commission (“CSRC”) approval, RMB 30 million in share capital, three years financial record profitability and having at least 1,000 shareholders who hold 25% of the total number of the company's shares.

⁷⁸ According to International Institute Management Development (“IMD”) World Competitiveness Yearbook 2004, Israel ranks No.1 in total expenditure on R&D as a percentage of GDP, No.2 in public expenditure on education as a percentage of GDP, No.3 in skilled labor availability, levels of entrepreneurship and qualified engineers available in the labor market. According to the World Economic Forum (“WEF”) Global Competitiveness Report 2004, Israel ranks No.1 in technological readiness and No.2 in venture capital availability.

⁷⁹ Report of the K.B. Chandrasekhar Committee on Venture Capital, Securities and Exchange Board of India (2000) at 13, online: http://www.sebi.gov.in/commreport/venture.doc.

⁸⁰ There are many regulations on overseas listing of Chinese companies, e.g. Securities Law of People's Republic of China, Special Regulations of the State Council Concerning Floating and Listing of Shares Overseas by Joint Stock Limited Companies (1994), Notice of the State Council on Further Strengthening the Administration of Share Issues and Listings Overseas (1997) and Opinion on Further Standardizing Operations and Reform of Companies Listed Outside China (1999).

⁸¹ In China, there are systemic deficiencies in the process of evaluation, acquisition, and approval, which may result in domestic assets being sold too cheaply to foreign investors. Also large numbers of red chip companies raising money through overseas IPOs and converting such foreign currencies into RMB to be used in China will cause an imbalance of payment on China's foreign exchange.

⁸² For a detailed analysis of these requirements on the red-chip method of listing, see Lu et al., supra note 4.

⁸³ Liu, J.J., “The Application of Tax Incentives for the Development of Venture Capital—An Overview on Tax Policies” (2007) Venture Capital Research Institute, Beijing University Google Scholar.

⁸⁴ Mason, C.M. & Harrison, R.T., “Influences on the Supply of Informal Venture Capital in the UK: An Exploratory Study of Investor Attitudes” International Small Business Journal 18(4) (2000) 11 CrossRefGoogle Scholar.

⁸⁵ See Gompers & Lerner, supra note 60.

⁸⁶ Porteba, J.M., “Venture Capital and Capital Gains Taxation”, in Lawrence, H.S. (Eds.) Tax Policy and the Economy, Vol.3 (Cambridge: MIT Press, 1989), p.47–67 Google Scholar.

⁸⁷ Carroll, et al., “Personal Income Taxes and Growth of Small Firms” in Perteba, , Tax Policy and the Economy, vol. 15 (Cambridge: MIT Press, 2001)Google Scholar.

⁸⁸ See Armour, supra note 53.

⁸⁹ This is due to a system of deemed tax credit of 80%. See Singh, Sajai, “Venture Capital Investment in the Indian Market” (2006), online: <http://www.abanet.org/buslaw/committees/CL930000pub/newsletter/200603/singh.pdf>Google Scholar.

⁹⁰ Singh, ibid. at 8.

⁹¹ Enterprise Income Tax Law (2007), Arts 3(3) and 4(2).

⁹² Circular of the Ministry of Finance and State Administration of Taxation on the Relevant Tax Policies on the Development of Start-up Investment Enterprises (2006), Art 1. The amount to be deducted can be carried forward until it is used up. To qualify for this tax incentive, the domestic VCF must invest in eligible entrepreneurial firms which are recognized as “high-tech” enterprises under the relevant laws and regulations. Further, for investee companies, the total number of employees should not be than 500, the annual sales revenue should not be more than RMB 200 million, and the total assets should not be more than RMB 200 million, the fund utilized for the R&D of new and high technologies and products should account for 5% or more of the sales revenue of the enterprise, and the aggregate of the revenue from the sale of technologies and of new and high-tech products should account for 60% or more of the total revenue of this enterprise.

⁹³ See e.g. Glaeser, Edward L., “Learning in Cities” Journal of Urban Economics 46(2) (1999) 254 CrossRefGoogle Scholar; Klepper, Steven, “Employee Startups in High-Tech Industries” Industrial & Corporate Change 10(3) (2001) 639 CrossRefGoogle Scholar.

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⁹⁵ Milhaupt, supra note 12 at 891.

⁹⁶ Every year China generates more than 5 million college graduates, among whom more than 600,000 major in engineering and 100,000 in information and technology (“IT”). India also has a large pool of low-wage but technically qualified people. By 2002, the number of IT professionals in India reached 520,000. In addition, a large proportion of Indian graduates are proficient in English and well-suited to the Information Technology-Enabled Services industry.

⁹⁷ E.g. in the 1980s, the “Sunday Engineers” from Shanghai SOEs were hot favorites in Jiangsu province and Zhejiang province. Such practice was soon copied in other parts of the country.

⁹⁸ Saxenian, A., “Silicon Valley's New Immigrant Entrepreneurs”, (May 1, 2000). Center for Comparative Immigration Studies, Working Papers 15, available online: http://repositories.cdlib.org/ccis/papers/wrkg15 Google Scholar

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¹⁰¹ E.g. in the case of India the relevant laws include Industrial Disputes Act (IDA), 1947; Minimum Wages Act, 1948; Trade Unions Act, 1926; Contract Labor Act, 1970; Weekly Holidays Act, 1942; Beedi and Cigar Workers Act, 1966. In China, the relevant laws include Labor Law (2007), Labor Contract Law (2007), Trade Unions Law (2001), General Principle of Civil Law (1986), Civil Procedural Law (1991), etc. For a comparative review of the two countries labor institution development, see Saha, B., “Labor Institutions in China and India: A Tale of Two Nations” Journal of South Asian Development 1 (2006) 179 CrossRefGoogle Scholar.

¹⁰² World Bank's Rigidity of Employment Index, online: http://www.doingbusiness.org/ExploreTopics/EmployingWorkers/.

¹⁰³ See Basu, Kaushik, “Why India Needs Labor Law Reform” BBC News (27 June 2005), online: <http://news.bbc.co.uk/2/hi/south_asia/4103554.stm>Google Scholar.

¹⁰⁴ The size of the informal sector is constructed from the answer to the World Economic Forum's business survey on the question “how much business activity in your country would you estimate to be unofficial or unregistered,” scaled from 0 to 100 % of the country's entire economic activity. The latest statistics show that during 2005-2007, in China the informal sector was about 27.9%; in India the informal sector was about 29.2%. Data sourced online: http://www.economics.harvard.edu/faculty/shleifer/files/tax%20data%20final%20ian%2010.xls.

¹⁰⁵ E.g. Morris and Pitt made a detailed comparison between entrepreneurial and non-entrepreneurial activities in the informal sector in developing countries. See Morris, et al., “Entrepreneurial Activity in the Third World Informal Sector” International Journal of Entrepreneurial Behavior & Research 2 (1) (1996) 59 at 64 CrossRefGoogle Scholar.

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¹⁰⁷ Solt, M.E., “Transforming China in the 21st Century through Entrepreneurship” Journal of Asian Entrepreneurship and Sustainability (1 May 2007)Google Scholar.

¹⁰⁸ Dossani & Kenny, supra note 4 at 12.

¹⁰⁹ Khanna, supra note 49 at 122.

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¹¹⁵ Ibid. See also Beck, T., Demirgüc-Kunt, A. & Levine, R., “Law and Finance: Why does Legal Origin Matter?” Journal of Comparative Economics 31 (2003) 653 CrossRefGoogle Scholar; Beck, T., Demirgüc-Kunt, A. & Levine, R., “Law, Endowments and Finance” Journal of Financial Economics 70 (2003) 137 CrossRefGoogle Scholar.

¹¹⁶ Armour & Lele, supra note 29. See also Hayek, F.A., Law, Legislation and Liberty, Vol 1: Rules and Order (Chicago: University of Chicago Press, 1978)CrossRefGoogle Scholar; Mahoney, P.G., “The Common Law and Economic Growth: Hayek Might be Right” J. Legal Stud. 30 (2001) 503 CrossRefGoogle Scholar; Dam, K. The Law-Growth Nexus (Washington, DC: Brookings Press, 2006)Google Scholar.

¹¹⁷ Maskus, K.E., “The Economics of Global Intellectual Property and Economic Development: A Survey” in Yu, Peter K., Intellectual Property and Information Wealth: Issues and Practices in the Digital Age (Westport: Praeger Publishers, 2007)Google Scholar.

¹¹⁸ Maskus, ibid. The author makes a strong case that poor administration of the rules and lack of enforcement render China's impressive laws ineffective. In a few developed parts of the country, such as Shanghai and Beijing, domestic companies increasingly understand that they need IP rights protection in order to thrive. However, the vast majority of companies, local governments and consumers benefit from infringement, making it exceedingly difficult to move towards successful enforcement. Maskus concludes that for the time being the situation is likely to get worse, especially as the less developed regions of China struggle to improve their economies.

¹¹⁹ See Indian cases on judicial safeguards of private property rights, e.g. Kameshwar Singh v. State of Bihar AIR 1951 Patna 91; Vajravelu v Special Deputy Collector AIR 1965 SC 1017; Union of India v the Medical Corporation of India AIR 1967 SC 637 (later overruled by the Supreme Court in State of Gujarat v Shantilal AIR 1969 SC 64).

¹²⁰ Armour & Lele, supra note 29.

¹²¹ World Bank “Doing Business Project” on “Ease of Enforcing Contracts”, online: http://www.doingbusiness.org/ExploreTopics/EnforcingContracts/.

¹²² Debroy, B., “Some Issues in Law Reform in India” in Dethier, J.J., Governance; Decentralization, and Reform in China, India and Russia (London: Kluwer Academic Publishers, 2000)Google Scholar.

¹²³ Armour & Lele, supra note 29.

¹²⁴ Bruton & Ahlstrom, supra note 35.