Determinants of Foreign Portfolio Investment and Its Effects on China

Abstract

<p>Foreign portfolio investment consists of securities and other capital inflows of assets possibly held by other foreign countries. Foreign Portfolio Investment (FPI) provides the investor with indirect ownership of financial assets. This study intends to investigate the economic factors which attract the investors to invest in the host country. We observed what the impact of FPI determinants on the Chinese economy. To elaborate our results we used multiple regression models by using E-views. This study investigates the effects of FPI and its determinants of the economic structure of China. The data of FPI, GDP, FDI, EXD and P has been taken from the World Bank. GDP and External Debt are the strong determinants of the FPI, the Exchange Rate, Population shows that these variables have a significant impact on the FPI. The investors speculate the high returns, more secure investors’ rights and feel safer to invest in the country.</p>