CAN CHINA’S FOREIGN DIRECT INVESTMENT CAUSE ECONOMIC GROWTH IN ASEAN?

Abstract

This paper uses systematic panel data methods to scrutinize the impact of China’s foreign direct investment (FDI) on economic growth in eight Association of Southeast Asian Nations (ASEAN) countries from 2004 to 2018. The findings indicate a statistically significant causal association between these countries’ economic growth and Chinese investment, which shows that China’s FDI is not a cause but rather a result of the economic expansion. Specifically, the results show that there was a causal chain running from fixed capital to Chinese FDI, through trade openness, in the relatively wealthier ASEAN countries; also, there was a causal chain running from economic growth to Chinese FDI, through trade openness, in relatively poorer ASEAN countries.