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

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  • Liu, Ling
  • Gozgor, Giray
  • Mahalik, Mantu Kumar
  • Pal, Shreya

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.

Suggested Citation

  • Liu, Ling & Gozgor, Giray & Mahalik, Mantu Kumar & Pal, Shreya, 2025. "The impact of the US-China tensions on FDI dynamics in emerging economies," Finance Research Letters, Elsevier, vol. 78(C).
    • Handle: RePEc:eee:finlet:v:78:y:2025:i:c:s1544612325005185
    DOI: 10.1016/j.frl.2025.107255
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    1. Peng, Cheng & Deng, Huimin & Xie, Jiaquan & Liu, Xiang, 2025. "US-China tension and stock market performance in US and China: New insights from time-varying quantile causality method," Finance Research Letters, Elsevier, vol. 85(PA).

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