What affects FDI? Empirical evidence from China

Chin, Zhi Yee and Mok, Zi Hong and Tok, Kai Xiang (2024) What affects FDI? Empirical evidence from China. Final Year Project, UTAR.

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Abstract

The group had put effort to conduct a study on the fascinating concepts regarding foreign direct investment (FDI). The reason to choose to study this topic is because FDI plays a vital role in shaping a country’s economic growth and development. However, the FDI inflow had declined due to economic and political instability, internal and external factors, and China was affected by it. Hence, the study decided to examine how CO2 emissions, inflation rate, interest rate, and trade openness affect the FDI in China. We conducted secondary research and collected time series data from the World Bank Data. The study used OLS Regression Analysis to perform data analysis in this study. We conducted the Variance Inflation Factor (VIF), Jacque-Bera Test, Breusch-Pagan-Godfrey Test, and Augmented Dickey-Fuller Test to test the relationship between the independent variables, CO2 emissions, inflation rate, interest rate, trade openness, and the dependent variable, foreign direct investment. Throughout the results, we discovered that there is a positive significant relationship between CO2 emissions, inflation rate, interest rate, and foreign direct investment. However, we also found that insignificant relationship between trade openness and foreign direct investment. The results from our study might be useful for stakeholders such as the government, and policymakers to increase the interest rate, maintain the inflation rate, and focus on infrastructure and technology development. The limitations and recommendations of the study also can help future researchers take precautions and improve the findings in future research.

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