FDI inflows in Asia : a study on China & Malaysia’s / Nur Syazwani Mohd Raidzuan

Motivated by the macroeconomic factors that contribute towards the inflows of FDI into China and Malaysia, this study empirically examined the correlation of the macroeconomic determinants of FDI between the two countries by using the annual time series from 1970-2006. Furthermore, this paper also attempted to study the similarities between Malaysia and China based on their relationships of FDI inflows and macroeconomic variables namely the market size of the host country (GDP), the economic growth, the inflation rate and also the exchange rate. Using the multiple linear regression analysis as part of the methodology approach, this study explained the relationships and dynamic association that exist between the independent and dependent variables. From the result findings, it can be seen that both countries had some similarities in terms of the relations it has on FDI inflows and the market size (GDP), economic growth, and also the exchange rate. However, this study had unexpectedly found that there was no significant relation between inflation and FDI inflows in Malaysia whereas in China there was a significant relation between inflation and FDI inflows. As expected, the exchange rate also contributed towards the inflows or influx of FDI into the host countries.
Exchange rate somehow had a significant negative relationship towards the FDI inflow. Therefore, there were some similarities and differences found in this paper between Malaysia and China's determination of FDI inflows when looking at the macro economic variables context as analyzed in this study.