Promoting Sustainable Manufacturing Growth Through Foreign Direct Investment and Foreign Trade: Evidence from China’s 28 Sub-Industries

Xiaomei Li () and Radziah Adam ()
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Xiaomei Li: School of Economics and Management, Guangdong Technology College, Qifu Avenue, Gaoyao District, Zhaoqing 526100, China
Radziah Adam: School of Distance Education, Universiti Sains Malaysia (USM), Penang 11800, Malaysia

Sustainability, 2025, vol. 17, issue 20, 1-21

Abstract: This paper systematically explores the dynamic effects of foreign direct investment (FDI), foreign trade, technological innovation, and human capital across China’s 28 sub-industries. The results show that FDI and foreign trade significantly promote manufacturing output growth, while technological innovation and human capital have a more sensitive response to growth fluctuations in the short term. The Granger causality test shows that FDI, technological innovation, and human capital all have strong predictive power and can effectively predict the future trend of manufacturing output. The impulse response function and variance decomposition analysis further reveal the key role of these factors in promoting the manufacturing industry’s long-term sustainable development. Based on the above findings, this paper suggests that local government should continue to optimize the structure and quality of attracting foreign capital, increase the support for technology research and development and intelligent manufacturing, enhance the added value of export products, and strengthen human capital investment so as to promote China’s manufacturing industry’s high-quality and sustainable development and provide reference for other developing countries’ manufacturing development.

Keywords: foreign direct investment; foreign trade; manufacturing growth; technology innovation; PVAR model (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
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