The Impact of Population Aging on FDI Inflow in China—An Empirical Analysis Based on Provincial Panel Data

Abstract

With the increasingly serious situation of population aging in China, the impact of population aging cannot be ignored. This study analyzes the effect of population aging on the attraction of FDI inflows in China through the construction of an empirical model. The results show that there is a significant “inverted-U” relationship between population aging and FDI inflows, and aging negatively affects foreign investment inflows after crossing the aging inflection point. Based on the findings, this study proposes policy recommendations based on the quantity and quality of the labor force, such as improving the policy of gradual delayed retirement, improving the level of human capital, and promoting the regional mobility of the labor force, to provide feasible research ideas to enhance the attractiveness of FDI in regions with different levels of aging.

The impact of population aging on FDI: A panel data analysis based on 27 segments in China’s manufacturing industry

“…Mitra and Maria (2021), after empirically analyzing data on population aging and FDI in 22 OECD countries, find that increasing population aging does not have a significant impact on net FDI in these countries [18]. Xu Xinpeng et al (2022), using empirical analysis of provincial panel data in China, find that the relationship between aging and FDI exhibits an inverted "U" shaped non-linear relationship, with FDI inflows decreasing gradually after the aging level crosses the "inflection point" [19].…”

“…Exploring the relationship between aging and FDI in the manufacturing industry is of crucial importance to deeply analyze and assess the development trend of FDI in China's manufacturing industry in the future. Existing studies have explored in depth how population aging affects FDI [15,18,19], but there is a problem that most of them are based on the macro perspective of the country or the provincial level to explore the relationship between aging and FDI. However, the conclusions from the macro perspective to make targeted suggestions may be less helpful for the development of the industry and cannot boost the rapid economic development of the industry.…”