© Sam Dzever and Jacques Jaussaud 1999 and acques Jaussaud 1999 and Sam Dzever and Wang Zhengyi 1999 and Macmillan Press Ltd 1999. With 40 per cent of the world¿s population, India and China are potentially both the world¿s largest markets and the biggest host countries for EU foreign direct investment (FDI). Investment from abroad has been a major driving force in the attainment of high growth rates in these countries? The attraction of inward investment has occurred as a result of unprecedented programmes of economic reforms, which were facilitated by the phenomenon of trade liberalization and globalization of both production and investment. It became clear to both the Chinese and Indian governments that their economic take-off could only be achieved by attracting technology-embodied foreign investment. Given their size and their level of development,3China and India are apparently direct competitors for FDI.