The impact of the US-China tensions on FDI dynamics in emerging economies

Ling Liu, Giray Gözgör, Mantu Kumar Mahalik and Shreya Pal

Finance Research Letters, 2025, vol. 78, issue C

Abstract: Utilising panel data of 14 emerging economies from 1993 to 2022, we employ the Pooled Mean Group-Panel Autoregressive Distributed Lag (PMG-ARDL) model to analyse the effects of economic growth, regulatory quality, exchange rate stability, and geopolitical risks alongside the US-China Tension index on foreign direct investment (FDI) inflows. We find that robust economic growth and stable exchange rate increase FDI. Along with geopolitical risks and regulatory quality, the US-China Tensions deter FDI. These findings highlight firms' shifting investment patterns in emerging markets under risks.

Keywords: The US-China tensions; FDI inflows; Emerging economies, PMG-ARDL model (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:78:y:2025:i:c:s1544612325005185

DOI: 10.1016/j.frl.2025.107255

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