For all the differences between China's and India's economic ascents in recent decades, one of the most striking is their differing approaches to foreign direct investment (FDI). Whereas China has relied heavily on FDI, India's opening has been considerably more gradual and more limited. This refreshing new book explains why.

While many political scientists would focus on China's and India's contrasting political systems, Min Ye takes a different approach. The key difference, in her view, lies in the two countries' relations with their diasporas. More precisely, it lies in the nature of Chinese and Indian policymakers' ties with diasporic entrepreneurs and how these compare with ties to indigenous businesses. In China, the process of opening was powerfully supported by diaspora entrepreneurs in Hong Kong, Macau, Taiwan and Southeast Asia, who not only had substantial capital to invest but also intimate ties with Chinese officials at both the national and local levels. The Indian diaspora, in contrast, has struggled to support India's opening in the same way. They have faced less favourable geography, had less capital to lavish on their home country, and have lacked connections to local officials. As a result, India's diaspora entrepreneurs have had far more trouble overcoming resistance to FDI from domestic businesses.

The underlying theory is sophisticated. It posits two stages in the course of opening and includes processes and backlash and consolidation. It highlights the importance of shared ethnicity in bridging the gap between domestic policymakers and foreign investors from the diaspora. The theory is also difficult to test, highlighting as it does contacts between a wide range of policymakers on the one hand and domestic and foreign entrepreneurs on the other. Even so, the evidence amassed in the individual case studies is impressive. Drawing on a wide variety of Chinese-language materials, the author traces contacts between Chinese officials and diaspora entrepreneurs, including Y.K. Pao, Lee Ka-shing, and many others, going back to the 1970s. The contrast with the Indian case, where external supporters of opening were overwhelmed by domestic resistance in the 1980s, is stark. The most compelling part of the study, however, lies in the last two chapters leading up to the conclusion. These compare the information technology (IT) and auto sectors within each country. In both countries, diaspora networks were strong in the former but relatively weak in the latter. In both countries, this led to more robust opening to FDI in IT than in autos.

If the book answers many questions, there are others that might have received greater scrutiny. Social scientists will want more in-depth discussion of how the relative strength of policymakers' domestic and external networks should be assessed. More might have been said, too, about India's opening to FDI after 1991. This is a complicated topic, with Indian policies fluctuating over time, and it was unclear just how much of this complex variation the theory explained. The book also notes potential implications for other countries pursuing late development, but one wonders which additional cases might be most profitably explored.

More generally, however, the book represents a remarkable achievement in the study of China's and India's openings to the outside world. Highlighting the roles of history, geography and ethnicity, as well as the agency of diaspora entrepreneurs, it powerfully challenges the notion that political structure or state capacity explains China's and India's different approaches to FDI. It is also an important contribution to the study of diasporas more generally, and with growing interest in this topic in recent years, it comes at an opportune time. Perhaps most intriguing, the author concludes by suggesting that the future of Chinese and Indian policymaking may be different from the past. The influence of China's diaspora over Chinese policymakers appears to be waning, while the opposite trend is evident in India. These trends deserve careful scrutiny in the future – and they suggest that comparative studies of economic reform in China and India will remain fruitful ground for research.