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The impact of population aging on FDI: A panel data analysis based on 27 segments in China’s manufacturing industry

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  • Yujie Li
  • Tingwei Chen
  • Zongbin Zhang

Abstract

Foreign Direct Investment (FDI) is an important part of China’s new "double-cycle" development pattern. Among the many factors affecting FDI, will the aging population have an impact on manufacturing, the key industry for FDI? This paper examines the direct and indirect effects of an aging population on FDI using panel data from 27 manufacturing sub-industries in China between 2005 and 2020. It is found that (1) the deepening of the population’s aging negatively affects FDI inflows and this result continues to hold after a series of robustness tests. (2) Using labor quantity and labor cost as mediating variables, it is found that the population’s aging indirectly affects FDI by reducing labor quantity and increasing labor cost. (3) The heterogeneity analysis study finds that the deepening of the population’s aging significantly inhibits FDI in labor-intensive and capital-intensive industries among manufacturing sub-industries, and the inhibitory effect on FDI in technology-intensive industries is not significant. This study provides meso-evidence to support the findings of existing studies and provides suggestions and insights for the government to formulate relevant policies to actively cope with aging.

Suggested Citation

  • Yujie Li & Tingwei Chen & Zongbin Zhang, 2024. "The impact of population aging on FDI: A panel data analysis based on 27 segments in China’s manufacturing industry," PLOS ONE, Public Library of Science, vol. 19(2), pages 1-16, February.
    • Handle: RePEc:plo:pone00:0297485
    DOI: 10.1371/journal.pone.0297485
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