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Nonlinear Effects of China’s Economic Policy Uncertainty on FDI Inflows in Southeast Asian Countries

Author

Listed:
  • Buu Kiem Dang

    (Faculty of Finance and Accounting, Saigon University, Ho Chi Minh City, Vietnam)

  • Nguyen Tuyet Minh Ha

    (Faculty of Economics, Nam Can Tho University, Can Tho City, Vietnam)

Abstract

The return of Donald Trump to the US presidency has reignited concerns over the US-China trade war that previously took place. This study aims to provide further insights into the impact of China’s economic uncertainty on foreign direct investment (FDI) inflows in Southeast Asian countries. China’s economic uncertainty is assessed through various dimensions, including the US–China Tension Index, the Economic Policy Uncertainty Index for China, and the Trade Policy Uncertainty Index for China. The study sample comprises 11 Southeast Asian countries over the period 1993–2023. Reliable panel data estimation methods, including fixed effects models (FEMs), Driscoll–Kraay standard errors, and robustness checks using the two-step system GMM method, are employed. The findings reveal a consistent inverted U-shaped nonlinear impact of China’s economic policy uncertainty on FDI inflows in Southeast Asian countries. This research makes a significant contribution by enriching the understanding of how multinational corporations respond to economic policy uncertainties and trade disputes.

Suggested Citation

  • Buu Kiem Dang & Nguyen Tuyet Minh Ha, 2025. "Nonlinear Effects of China’s Economic Policy Uncertainty on FDI Inflows in Southeast Asian Countries," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 16(03), pages 1-21, October.
    • Handle: RePEc:wsi:jicepx:v:16:y:2025:i:03:n:s1793993325500152
    DOI: 10.1142/S1793993325500152
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    Keywords

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    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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