Author(s)

JingYi Zhao

Affiliation(s)

School of Economics, Shanghai University, Shanghai 201800, China.

Corresponding Author

JingYi Zhao

ABSTRACT

Distinct from the existing literature that predominantly focuses on the economic impact of either FDI or OFDI in isolation, this study examines the synergistic effects and coordinated development of two-way FDI on the digital economy across Chinese provincial regions. The findings reveal that the coordination of two-way FDI exerts a positive influence on the digital economy. This impact mechanism exhibits a distinct threshold effect, moderated by two key threshold variables: the level of local trade openness and the characteristics of the industrial structure. Notably, the facilitative effect of two-way FDI coordination is more pronounced within the Yangtze River Economic Belt, whereas in regions outside the Belt, it still contributes to the growth of the digital economy but with statistically weaker significance. This research not only offers policy implications for China's foreign trade and digital economic development but also elucidates the underlying mechanisms and threshold conditions involved. It provides valuable insights for regional economic and digital advancement in China, while also serving as an important supplement to the literature on two-way FDI.

KEYWORDS

Foreign Direct Investment (FDI); Outward Foreign Direct Investment (OFDI); Digital economy; Threshold model

CITE THIS PAPER

JingYi Zhao. The impact of two-way FDI interactive development on China's digital economy. World Journal of Economics and Business Research. 2025, 3(5): 66-71. DOI: https://doi.org/10.61784/wjebr3077.

REFERENCES

[1] Jiang M S, Jiao J, Lin Z, et al. Learning through observation or through acquisition? Innovation performance as an outcome of internal and external knowledge combination. Asia Pacific journal of management, 2021, 38(1): 35-63.

[2] Sultana N, Turkina E. Foreign direct investment, technological advancement, and absorptive capacity: A network analysis. International Business Review, 2020, 29(2): 101668.

[3] Contractor F J, Nuruzzaman N, Dangol R, et al. How FDI inflows to emerging markets are influenced by country regulatory factors: an exploratory study. Journal of International Management, 2021, 27(1): 100834.

[4] Zhang Y, Zhang Z, Jin H, et al. Innovation and OFDI along the Belt and Road. Technological Forecasting and Social Change, 2024, 200, 123136.

[5] Xin D, Zhang Y. Threshold effect of OFDI on China’s provincial environmental pollution. Journal of Cleaner Production, 2020, 258, 120608.

[6] Jiang M, Luo S, Zhou G. Financial development, OFDI spillovers and upgrading of industrial structure. Technological Forecasting and Social Change, 2020, 155, 119974.

[7] MacDougall D. The benefits and costs of private investment from abroad: A theoretical approach//Studies in Political Economy: Volume II: International Trade and Domestic Economic Policy. London: Palgrave Macmillan UK, 1975, 109-134.

[8] Yang F, Chen T, Zhang Z. Can environmental, social, and governance performance drive two-way foreign direct investment behavior? Evidence from Chinese listed companies. Journal of Cleaner Production, 2023, 430, 139761.

[9] Ma G, Qin J, Zhang Y. Does the carbon emissions trading system reduce carbon emissions by promoting two-way FDI in developing countries? Evidence from Chinese listed companies and cities. Energy economics, 2023, 120, 106581.

[10] Song H, Chen W. Can two-way foreign direct investment promote green innovation capability in manufacturing? The threshold role of intellectual property protection. Journal of Cleaner Production, 2023, 425: 139035.

[11] Li J, Wu X. Does two-way FDI promote technological innovation? — Evidence from China. Heliyon, 2024, 10(22).

[12] Tao Z, Zhang Z, Shangkun L. Digital economy, entrepreneurship, and high-quality economic development: Empirical evidence from urban China. Frontiers of Economics in China, 2022, 17(3): 393.

[13] Huang L Y, Liu D D, Xie H Q. Research on the harmonious development of outward foreign direct investment and inward foreign direct investment. China Industrial Economics, 2018, 3, 80-97.