Research on the Impact of Coordinated Two-Way FDI Development on Industrial Chain Modernization: From the Perspective of Factor Allocation

Yue Ling, Yi Li () and Huiling Wang
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Yue Ling: School of Economics, Lanzhou University, Lanzhou 730107, China
Yi Li: School of Economics, Lanzhou University, Lanzhou 730107, China
Huiling Wang: School of Economics, Lanzhou University, Lanzhou 730107, China

Sustainability, 2025, vol. 17, issue 21, 1-28

Abstract: Industrial chain modernization is vital for driving the development of a modern country, boosting national competitiveness and upholding economic security. This study examines the impact of coordinated two-way FDI development on industrial chain modernization from the perspective of factor allocation, using panel data from 30 Chinese provinces from 2013 to 2023. The empirical results show that coordinated two-way FDI development significantly boosts industrial chain modernization. This finding holds across multiple robustness tests. Mechanism analysis confirms that the alleviation of capital-labor factor misallocation serves as a key transmission channel. Furthermore, heterogeneity analysis reveals significant heterogeneous effects across regions, ownership structures, investment types, and industry sectors. Notably, the synergistic interaction between downward-gradient inward FDI and reverse-gradient outward FDI, along with coordinated two-way FDI development in the manufacturing sector, has the highest gray correlation degree with industrial chain modernization. These findings provide a solid theoretical basis and practical policy insights for advancing industrial chain modernization.

Keywords: China’s industrial chain modernization; coordinated two-way FDI development; capital misallocation; labor misallocation; gray correlation (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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