DETERMINANTS AND INVESTMENT PROCESSES OF CHINA

Abstract

The article reveals the determinants and dynamics of foreign direct investment inflows into China, and also examines the outward investment of China's banking sector in foreign countries. The purpose of this article is to investigate the determinants and dynamics of Foreign Direct Investment(FDI) inflows into China over 2015–2024, identifying key influencing factors at global, domestic, and structural levels while incorporating outward banking investment linkages to provide insights into trends, challenges, and opportunities for sustainable growth. Tasks include: (1) mapping inflow trends and volatility; (2) dissecting source/sectoral structures; (3) detecting breakpoints; (4) analyzing outward banking investment as a complementary flow; and (5) formulating investment policy recommendations. The study utilizes official "utilized" FDI data from the Ministry of Commerce (MOFCOM), supplemented by AMRO bank summaries, United Nations Conference on Trade and Development (UNCTAD) reports, CEIC Data, and China Briefing. Analytical approaches include trend analysis, linear regression (ordinary least squares), breakpoint examination, and graphical visualizations to assess inflows, volatility, and source compositions. The following results were achieved in the course of the research. A study of the dynamics of foreign direct investment was conducted, taking into account the impact of the pandemic. The focus is on the attractiveness of the high-tech sector, as well as the influence of the political factor on the repatriation of capital and geopolitical tensions. The regional features of investment processes and their diversification were studied. The role of BRI in the growth of FDI, the transition from scale to quality of investment investments were studied. The originality of the study lies in the following. The analysis introduces a multi-level nonlinear structure linking inward FDI and outward bank flows, uniquely capturing the 2023–2024 downturn, negative net FDI, and structural resilience that have been underexplored in previous studies up to 2020. The practical value of the study is as follows. The research provides recommendations for improving investment policy, focusing on regulatory predictability, leveraging high-tech, deepening Asian partnerships, and global integration. The recommendations will help policymakers, investors, and businesses navigate the changing investment landscape of China's dual-stream economy.